Along with Mergers and Acquisitions, Big Food Companies Consider Start-Ups

Stephanie Strom reported in Friday’s New York Times that, “General Mills, one of America’s corporate food titans, is quietly establishing itself in venture capital, investing in some of the hottest new food companies.

It is just one of a small but growing number of giant food companies that have decided they can no longer afford to sit on the sidelines as smaller, more nimble start-ups outmaneuver them in the race for consumers seeking minimally processed, locally sourced, environmentally sustainable foods free of preservatives and chemicals.

“General Mills’ latest investment is part of $18 million going into Kite Hill, which makes versions of cheese and yogurt from nuts — no cows involved.”

Ms. Strom explained that, “General Mills is not the only food company dabbling in venture capital. This year, Campbell put $125 million into an in-house venture capital business called Acre Venture Partners. And Unilever has long had a venture capital unit.

Big food companies traditionally favor mergers and acquisitions, however. This week, for example, Hormel bought Justin’s, which makes nut butters and peanut butter cups that are gaining share against longtime market leaders. And last year, Mondelez bought Enjoy Life Foods, a snack foods business playing in what the industry calls the ‘free-from’ segment of the market — even though Mondelez also started its own line of such products.”

The Times article added that, “Many small food businesses are wary of taking money from, or getting bought out by, food giants, mindful of the many stories of small, successful companies that are bought only to all but disappear into a multibillion-dollar corporation.

“That reluctance has spawned a boom in small venture capital and private equity firms offering to finance small food businesses.”

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