Food incubation

PepsiCo partners with Chicago food incubator to foster emerging snack brands

By Douglas Yu

- Last updated on GMT

PepsiCo's partnership with The Hatchery Chicago may lead to acquisitions like RXBar and Kellogg. Pic: BAS
PepsiCo's partnership with The Hatchery Chicago may lead to acquisitions like RXBar and Kellogg. Pic: BAS
PepsiCo’s North America nutrition team has signed a partnership with The Hatchery Chicago to incubate more health and wellness-focused snacks.

PepsiCo North America Nutrition (NAN) focuses on the development of the company’s nutrition brands, including Quaker, Tropicana, Naked (which recently entered the snack bars category​) and KeVita.

Mutual benefits

Jody Menaker, the director of communications at PepsiCo NAN, said the collaboration with The Hatchery Chicago will create more mentorship and shared learning opportunities, including immersion programs, brainstorms and panel discussions.

“We’ll learn new business models and ways of working from the start-up community while exposing entrepreneurs to our deep knowledge of product development and go-to-market strategies.

“We also see this as a great way to keep our employees inspired to think differently and act more nimbly,”​ she added.

In return, The Hatchery Chicago members will gain access to PepsiCo’s industry insights, market data and new product developing skills, according Menaker.

Natalie Shmulik, CEO at The Hatchery Chicago, said: “We live in an age when everyone is investing in the brands and their values. [Through these investments,] smaller companies can learn what challenges big companies face, and how they can grow on a larger scale by working with retailers and distributors.”

The site reported the Chicago-based incubator received investment from Kellogg and Conagra​ to facilitate its move to a new building on the west side of the city later this year.

Once The Hatchery Chicago has relocated, its member startups can also sign up for one-on-one sessions with PepsiCo experts to help support their businesses in various ways, said Shmulik.

“There is a natural synergy between The Hatchery and PepsiCo… Our goal is to foster entrepreneurship and eliminate barriers of entry such as technical skills surrounding formulation, shelf life and having access to experts on sourcing and scaling up production,”​ she said.

Snack Brands
Shmulik told BakeryandSnacks 80% of the food startups The Hatchery Chicago works with are in the snacking category 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. The Hatchery Chicago is showcasing six of its member companies at the Summer Fancy Food Show in New York City later month, including Victory Dance Foods, Mera Bites, Departure Snacks, Spark Organics, The Worthy Company and Tea Squares.

‘It may lead to acquisitions similar to RXBar and Kellogg’

PepsiCo doesn’t have an internal investment unit like Kellogg’s eighteen94 and General Mills’ 301 Inc. to fuel the growth of these upcoming brands and put them under an umbrella other than a few food companies-accelerating initiatives.

“We’re always looking for opportunities to further innovation in the food industry by launching strategic partnership with incubators like The Hatchery Chicago and supporting food accelerator programs,”​ said Menaker.

For example, “in 2017, PepsiCo launched the Nutrition Greenhouse accelerator program in Europe to help nurture entrepreneurs in the nutrition, health and wellness space.

“The Hatchery Chicago and Nutrition Greenhouse initiatives take slightly different approaches to nurturing relationships between big and small food companies, but serve similar goals of learning from each other and promoting growth on both sides,” ​she noted.

“PepsiCo is also a sponsor of the PepsiCo Mass Challenge Leadership Mentor Program, a Boston-based startup accelerator that awards support to select businesses,” ​added Menaker.

When asked by BakeryandSnacks if The Hatchery Chicago could ultimately become PepsiCo’s external investment team to find potential acquisition targets, PepsiCo declined to comment, but said: “as we continue to build our portfolio of nutritious options, we’re always considering a variety of approaches.”

The Hatchery Chicago’s Shmulik added, “I know many CPG companies, PepsiCo included, are always looking for authentic brands they can partner with… [However], we certainly don’t encourage to create a brand just for the sake of acquisition.

“But I do think this partnership can create an early-on relationship [between our members and PepsiCo] that may eventually lead to acquisitions similar to RXBar and Kellogg… and that’s the opportunity we want to create anyway,”​ she said.

Co-creating PepsiCo’s internal brands

In the past, PepsiCo has relied on its own innovation team to tap into some of the popular consumer trends such as organic.

Last year, it launched a line called “Simply Organic”​ under its Frito-Lay brand, hoping to expand its presence in the natural grocery stores.

Schumilk said The Hatchery Chicago could contribute towards PepsiCo’s internal product development.

“We would love to be part of that as we want to be able to provide that engagement whether it comes from us directly or from the companies we work with… If an entrepreneur has ideas and co-create unique brands with PepsiCo, that would be wonderful,”​ she said.

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