VMG Partners has previously helped build several bakery and snacks companies including Bare Snacks and Quest Nutrition. Managing director Wayne Wu, who has been with the firm since 2008, said food trends are a “byproduct of what people are excited about.”
“In the investment industry, there tends to be a lot of conversations recently about investing in plant-based [products], protein and probiotics… The great ideas always come from the early stage of entrepreneurs,” he said.
For large companies who try to tap into those latest trends, acquiring emerging startups seems to be the way to go: For example, Kellogg recently took over RXBar for $600m, and Conagra Brands also acquired Boomchickapop popcorn owner Angie’s Artisan Treats as well as meat and seed snacks company Thanasi Foods earlier this year.
“Big CPG (consumers packaged goods) companies have endless resources to create phenomenal products, a beautiful package and brand, but one of the things we’ve seen with all the data is that it is really difficult to trade off authenticity,” Wu pointed out.
Often times when a big company steps in, its strategy is “contrary to how an emerging brand thrives,” he said. “They will integrate and try to extract synergies, but you see the brand slowly die.”
Wu added those companies need to “stay authentic” to keep their acquired brands special because millennial consumers prefer a real brand story that resonates with them – “that part cannot be created through a focus group,” he said.
However, president of Mattson (a consumer insights firm), Barb Stuckey, argued that big CPG companies can actually create their authenticity.
“For example, Kraft Heinz partnered with Oprah Winfrey [in creating a new line of refrigerated soups and side dishes],” she said. “Who’s more authentic than Oprah? Even though [Kraft] didn’t create the brand, they got into other categories… so there are partnerships, licensing, joint ventures and many other ways these companies can do to stay relevant [among consumers].”
“I absolutely agree that any food companies need to have authenticity, otherwise shoppers would sniff it out,” Stuckey added.
But how to spot the next RXBar as hundreds of food companies enter the snack space every year? Wu said VMG Partners does not look for new trends at the tradeshows.
“For us living and breathing in a very narrow set of categories, seeking new discoveries at the tradeshow can be overwhelming,” he said.
“We are doing our homework ahead of time on data related to who has more distribution, and we are looking at a lot of social media data that is combing through what seems to be growing not only from a sheer number of likes, but real engagement [with consumers].”
“There are so many companies out there, but only some of them are gaining traction,” Wu said.