June 23, 2016

Yesterday, as a panel of veteran investors at Global AgInvesting’s AgTech Week discussed the opportunity for venture capital in agriculture and food, yet another CPG giant announced its entrance into the venture capital (VC) field. Kellogg’s new VC arm will focus on food and related technology firms, ranging from natural foods to packaging and marketing efforts. Eighteen94 Capital (1894), named for the year the Kellogg brothers launched their iconic cereal, will target companies with revenues of $5 million to $10 million, according to TechCrunch.

Kellogg’s is the newest addition to the growing list of large CPG food manufacturers exploring venture capital investments as a means to meet rapidly-changing consumer expectations and demands for product innovation. According to the Dow Jones VentureSource, venture firms’ food and beverage investments rose to $603 million across 48 deals in 2015, a 60% increase from 2014 and a record annual amount for investment in the sector. In an effort to modernize and follow consumer trends, CPG companies that may be perceived as less transparent can use investments to access new market trends like organic, natural, “free-from” foods. General Mills and Campbell’s have already created their own venture capital arms, 301 Inc. and Acre Venture Partners, respectively, and in the case of General Mills’ 301 Inc., are already making investments in innovative branded foods such as alternative protein producer, Beyond Meat.

VC firms are able to identify successful brands in their infancy and bypass acquisitions of larger, established food companies. According to Eighteen94’s managing director, Simon Burton, “the rate of innovation across our industry has picked up dramatically. Things are changing quickly, and investing is a great way to get a sense of what’s going to be important in the future,” he said. In addition, these new products and ideas can benefit from a multinational manufacturer’s technical expertise, financial support, and marketing and distribution networks.

These advantages can help CPG companies stay ahead as they compete against a growing number of independent VC firms and food accelerators investing in and developing brands and technologies that are changing the consumer landscape. Earlier this year, AccelFoods, a packaged food and beverage accelerator, launched a $20M fund, its second, to invest in pre-seed to Series B projects. In contrast, the financial backing of CPG parent companies provides more flexibility in choosing brands with a longer-term growth strategy or investing in riskier, larger projects. Kellogg’s venture capital arm has plans to invest $100M over the next 5 years. The fund has not announced any deals as of yet. — Tiffany Agard

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Tiffany Agard