Kellogg and Conagra Brands invest in Chicago food incubator to fuel organic snacks growth

31-Oct-2017 - Last updated on 31-Oct-2017 at 18:30 GMT

Kellogg said its partnership with The Hatchery is a 'mutually beneficial endeavor.' Pic: The Hatchery

Kellogg and Conagra Brands have confirmed they are the only CPG investors behind Chicago-based food incubator The Hatchery, which is moving to a new location.

The 67,000-square-foot facility, which currently includes 56 private food-grade production spaces, broke ground on the west side of the city recently, expected to house production space for more than 75 food companies when opened in November 2018.

The incubator did not disclose how much investment it received from Kellogg and Conagra, but said it was a “significant amount.”

Snacks are "what the industry is demanding right now."

“Our partnership with The Hatchery is a mutually beneficial endeavor,” said Kellogg. “We’ll learn from them as they learn from us ... helping to facilitate business growth and development in a community that many of our employees call home.”

Conagra also said it would support The Hatchery “in various ways” as the facility is being built.

Getting products certified

Natalie Shmulik, food business consultant for The Hatchery, told BakeryandSnacks the facility started with a collaboration between two Chicago-based nonprofit organizations, Industrial Council of Nearwest Chicago (ICNC) and Accion Chicago.

“ICNC is one of the largest incubators in the country, while Accion Chicago provides small business loans to entrepreneurs who are looking for that initial running capital to get their businesses launched,” she said.

Shmulik said the partnership between the two organizations are “natural,” as many food startups are outgrowing their shared kitchens and need to find private production space.

“Typically in shared kitchen spaces, you don’t have the opportunities to get certifications like organic, Kosher, or gluten free,” she said. “A lot of the companies who are members of The Hatchery want to be certified, but it’s really challenging because they’re producing out of a facility that also produces wheat and allergen-based, nuts-based products.”

Conversely, many companies prefer to spend their money on sourcing local, organically-produced ingredients rather than getting certification, Shmulik said.

“Getting certifications is really expensive … I think more education is being offered to the general public about understanding where and how products are produced because local is more valuable than certifications,” she noted.

In addition to helping startups become certified, Shmulik said The Hatchery will have an ideation and event space where producers can test new ingredients and equipment.

80% snack companies

Shmulik said 80% of the food startups The Hatchery is working with are in the snacking space, because “that’s what industry is demanding right now.

“We’ve seen a trend of healthy and better-for-you snacks, and many of them are moving towards grain-free,” she said. “There are also lots of nuts-based products, like trail mixes.”

The Hatchery also provides technical services for several local chocolate and snack companies.

The new facility will also be home to ingredient specialists and food scientists to help snack companies formulate products differently without compromising taste and quality.

“We’re seeing people bring in new ingredients, whether it be new superfood or new flour, because [they want to] reduce sugar content, increase nutritional density and shelf life,” she said.

Provide more resources around Amazon

Commenting on the recent Amazon’s acquisition of Whole Foods, Shmulik said: “It’s great that companies have access to the traditional Whole Foods and also get - hopefully quicker - into Amazon because everything is moving towards e-commerce.

“E-commerce is valuable, so instead of making Whole Foods their end game, it should really be about Amazon, an online platform as their ultimate goal.

“We’ve done Amazon insight classes [at The Hatchery] before, and we’d love to do more and provide more resources to our entrepreneurs,” she added.

The Hatchery is expected to help create more “innovative concepts” in the food space, Shmulik said.

“Not every idea is going to be the next RXBar, but it will be great to provide an opportunity for those who want to test out their concepts and achieve success faster,” she said.