Expo West 2016

Gen Mills 301 Inc: ‘There is a clear trend towards early stage engagement’

By Elaine Watson contact

- Last updated on GMT

John Haugen: 'We’re not just a passive investor sitting back and asking for quarterly reports'
John Haugen: 'We’re not just a passive investor sitting back and asking for quarterly reports'

Related tags: Cottage cheese, Organic food

As 301 Inc’s recent investment in start-up Good Culture demonstrates, large CPG companies are placing bets in promising food companies earlier than ever as the natural & organic food market heats up, says general manager John Haugen, who is looking to do “around three to five deals a year”.

To date, 301 Inc – a venture arm set up by General Mills - has invested in plant-based ‘meat’ brand Beyond Meat​, veggie snacks maker Rhythm Superfoods​, and organic cottage cheese brand Good Culture​, while General Mills has recently acquired (outright) natural and organic brand Annie’s​ and meat snacks and beverages firm EPIC Provisions​.

While there is something of a feeding frenzy going on in the food & beverage market right now, however, investors have to be disciplined, said Haugen, noting that some valuations - especially in the food-tech arena - were “a little crazy​”.

There is a growing number of valuations that are very difficult to justify in this industry,” ​he told FoodNavigator-USA at the Natural Products Expo West trade show in Anaheim. “But our approach is to continue to be as principled as we can.”

The important thing, he said, was to have “early conversations” ​in order to identify brands with genuine promise well before any discussions about investment or partnership take place. “There is a clear trend towards early stage engagement.”

Cycle times are compressing

Good Culture​ – which has only had products on the market for seven months – is an unusually early bet, but a smart one, said Haugen, who noted that “cycle times are compressing​” and well-connected start-ups now have access to money and expertise that enables them to make progress more rapidly than was possible a few years ago.

And while many brands still start in the natural channel, they are moving into the conventional channel far more quickly, while online platforms such as Thrive Market that curate their selections give early stage brands “awareness and a seal of approval”,​ he added.

good culture new

Good Culture: instead of saying here’s a new cottage cheese, it’s a case of do you want to try this great new high protein snack?

Good culture organic cottage cheese comes in single serve pots that work well as a standalone snack (140-160 calories, 17-19g protein per 5.3oz pot) or with crackers, bread, nuts or other accompaniments as a mini-meal, and contain probiotics, chia seeds, fruit and veggie purees and no hydrocolloids, artificial stabilizers, preservatives, colors or flavors.

The brand first hit shelves in Whole Foods in August 2015, followed by Sprouts and Central Market in September 2015 before a national rollout at Whole Foods in January 2016.

It’s currently in around 700 stores and performing well in the cottage cheese and yogurt sets, according to co-founder Jesse Merril, who told FoodNavigator-USA that there were myriad ways that investors 301 Inc and CAVU could “accelerate growth​” at the Irvine, CA-based company.

According to Haugen: “I really liked the quality thinking that’s gone into the brand. I also like the way it reframes the debate and the conversation, so instead of saying here’s a new cottage cheese, it’s a case of: 'Do you want to try this great new high protein snack?'

“As for what Gen Mills can bring, there could be opportunities in sourcing, supply chain, brand and channel expansion, but this is not about us going in and articulating what General Mills’ vision for Good Culture is, it’s about helping Good Culture realize its vision.”

jesse

"Dairy as a superfood is ripe for disruption. Younger consumers, Millennials especially, want foods that are not full of artificial ingredients, that are less processed, that are fresh, and they are also looking for protein. But not all proteins are created equal and people in the dairy space need to communicate that it’s a complete protein that’s superior to a lot of the alternatives out there.

"Historically cottage cheese has been served in multi-stage containers but we’ve launched our brand in single serve on the go cups that cater to a younger consumer looking for a quick snack or meal replacement. We’re also offering savory options in a category that has historically just offered plain or pineapple.”

Jesse Merrill, co-founder, good culture, FoodNavigator-USA Dairy Innovation Forum, 2015

We read social media posts about potential targets   

In general, Haugen is looking for “remarkable products with a competitive advantage and ideally some IP behind them, although timing can be very important too.”

He added: “We look at the brand, how expandable it is, how scalable it is, how sticky is it, how loyal its consumers are, so we read facebook posts and other social media posts quite closely.”

Once a deal has been struck, he said, “We’re not just a passive investor sitting back and asking or quarterly reports, we want to get in the kitchen with them. Our mission is to try and build the next generation of awesome brands.”

steve young-john-foraker

We can expect to see more big, medium and small scale acquisitions and investments in the natural/organic space. Consumers want clean, simple, minimally processed food that’s as close to its natural state as possible and today natural, organic and non-GMO are shorthand for ‘clean’.”

Steve Young, VP marketing, General Mills (left)

There is a lot of new stuff out there and valuations are high. The growth in the industry has been amazing, but it’s getting a little frothy out there right now.”

John Foraker, president, Annie’s (right)

As to the number of deals 301 Inc is likely to do in a year, he said:  “It’s not a numbers game, it has to be the right deals. We’re looking at maybe three to five deals a year, but that’s not a fixed number.”

So what’s the end game?

“Obviously for the process to culminate in an acquisition, that would be extremely positive,” s​aid Haugen. “But I don’t expect that will happen in 100% of cases.”

taylor

About six months in, a large multinational tried to buy us, for like a dollar, and we told them to f**k off…

[But] when we were approached by 301 Inc​, we really connected and bonded.”  

Taylor Collins, co-founder, EPIC Provisions

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