What can big companies learn from small companies? A lot, say Kraft Heinz and Tyson Foods

Leading a panel discussion at the recent Good Food Financing & Innovation Conference​​ organized by Family Farmed​​ in Chicago, Andy Whitman, managing partner of 2X Consumer Products Growth Partners said access to social media, e-commerce, and availability of third-party co-packers has leveled the playing field for small companies to help them compete against big food brands.

Big CPG venture capital arms such as Tyson Ventures, which invests in areas of sustainability and the “internet of food”,​ and the Kraft Heinz Springboard​​ accelerator platform launched this year are also playing a role, shifting the dynamic between large CPG manufacturers and startups.

The value in thinking small​

“We at Kraft Heinz are really good at producing things and scaling things,”​ Sergio Eleuterio, general manager, Springboard Brands, The Kraft Heinz Company, said during the panel discussion.

“What we’re not good at sometimes is being leaner. When you look at innovation, go-to-market, and communication there’s a lot to learn, and a lot to learn from people who are already doing that in the market.”​

Which is partly why Kraft Heinz established its Springboard program, selecting five food and beverage startups to participate in a 16-week program with access to the company’s extensive resources, from R&D and operations to brand marketing.

Eleuterio said that the intent of programs such as Springboard and the company’s other projects is to apply what they glean from their nimble competitors to update its existing conventional brands like Jello and Boca frozen veggie burgers.

“For us, at the end, of the day we are learning how they are doing things. We’re observing a lot and trying to codify and bring that back to our own brands,” ​he said.

“The objective for us really is not necessarily to acquire growth or to acquire companies or segments that are growing, but to get a broader perspective of the market that we can bring back to the mother brand.”​

Eleuterio shared that while the company is “learning every day” ​from its first incubator class, the most immediate lesson has been a teaching on social media and how to connect directly with consumers.

For Reese Schroeder, managing director at Tyson Ventures, the approach is much more of a direct investment strategy but rooted in understanding the next frontiers of the protein industry, particularly the evolution of ‘clean meat’.

At the end of 2016, Tyson Foods set up Tyson Ventures​​ as a wholly owned subsidiary with an initial funding commitment of $150m for corporate venture capital purposes.

Since then, the VC arm has made five major investments including a 5% stake in plant-based meat firm Beyond Meat in 2016, a recent co-led funding round in clean meat firm Future Meat Technologies​​, and the acquisition of organic chicken brand​​ Tecumseh Poultry LLC.

According to Schroeder, Tyson Ventures is “really reaching out to the entrepreneurial community and looking for innovation that could be complementary to us.​

“We’ve put some focus on alternative proteins, supply chain transparency and even connected devices for the kitchen,”​ Schroeder said.

“The way Tyson looks at it, like many big companies, is there’s a lot of innovation going on outside of the four walls of the company – Tyson remains an inquisitive company.”​

'If there is no connection between the product and the founder story, then we’re usually not interested'​

The road to success for a food or beverage entrepreneur can be fraught with challenges and it helps to have a partner in the journey. To gain the attention either from an accelerator program such as Springboard or seal an investment with Tyson Ventures, founders need to know their brand inside and out, Eleuterio and Schroeder said.

According to Eleuterio, it’s helpful for a product to reach the commercialization stage, but the founder story trumps most other criteria when deciding which early-stage food brands to partner with.

“The most important thing to me regardless of the stage is the founder story; we’re very focused on that,”​ Eleuterio continued.

“If there is no connection between the product and the founder story, then we’re usually not interested.”​

Schroeder added that simple research into the VC funds can go a long way when pitching to a potential investor.

“To the entrepreneurs out there, really study and learn about the corporate VC that you’re approaching. Determine yourself if you think you’re relevant to what they’re looking for,”​ Schroeder said.

“We’re willing to invest in pre-revenue or even early revenue as long as we really see there is technology, [or] there is a science coming.”​