June 27, 2018

General Mills’ venture unit, 301 INC has led a $12 million round of funding for NextFoods, the parent company of probiotic beverage maker GoodBelly. Contributing to the round were existing GoodBelly investors, including Emil Capital Partners.

NextFoods was co-founded in Boulder, Colorado, in 2007 by natural foods innovator Todd Beckman, and Steve Demos, the founder of WhiteWave Foods, and began making GoodBelly probiotics juices in 2008. Using the most beneficial  and scientifically-supported probiotic strains shows to improve digestion and wellness, GoodBelly produces an extensive line of beverages that are USDA Certified Organic, vegan, dairy-free, soy-free, kosher OU certified.

The company has also recently launched a line of probiotic nutrition bars through a collaboration with General Mills, which itself was seeking new paths to a presence in the digestive health market, reports Project Nosh.

The resulting licensing agreement allowed for General Mills to produce the bars and sell them under the GoodBelly brand beginning last year, and also led to 301 INC’s investment in the company.

“We liked the idea of spreading the brand across categories, that GoodBelly could be a digestive health brand that you could pick up in multiple places in the supermarket,” Alan Murray, CEO of GoodBelly, told Project Nosh. “We started exploring what it would be like if we had a broader relationship and it ultimately culminated in this investment.”

The Pro Team

This is not the first investment in probiotics for 301 INC.  In March of last year, the venture team announced its second investment within as many weeks – agreeing to lead a $6.5 million Series D for Farmhouse Culture, a category leader in probiotic foods and beverages.

Launched in 2008 by Kathryn Lukas, Farmhouse Culture began by selling sauerkraut at local farmers’ markets. In the ensuing years, the company has grown rapidly on the back of growing consumer demand for probiotic-rich foods and beverages, and has expanded its product line to include Gut Shots™ probiotic drinks, and Kraut Krisps™ – a chip made with 50 percent sauerkraut.

Indeed, General Mills is not alone in targeting probiotics for investment and growth. In February of this year Danone Manifesto Ventures led an impressive $30 million round for Harmless Harvest, a San Francisco-based producer and marketer of fresh, minimally-processed organic coconut water and probiotic beverages.

The lure of functional beverages also attracted global giants in the beverage category, such as PepsiCo.

Not only have health conscious consumers been turning away from soft drinks, but several cities across the U.S., including Chicago and San Francisco, voted to approve taxes on high-sugar beverages as a means to mitigate health issued linked to their consumption.

In response, soft drink giants have been investing in functional, bolt-on acquisitions that offer diversification into the health and wellness aisle, while also providing a hedge against new tax laws and catering to changing consumer tastes.

This landscape led PepsiCo in December 2016 to announce a definitive agreement to acquire KeVita – a leading North American maker of fermented probiotic and kombucha beverages for an undisclosed amount, however Fortune reported at the time that the deal was in the neighborhood of $200 million.

Keep Moving

Although GoodBelly was not seeking investment partners while collaborating with General Mills, John Haugen, vice president and general manager of 301 INC told the Star Tribune that the need to keep growing called for it.

“Standing still is probably the most dangerous place to be [as an emerging brand],” Haugen said. “As we spoke to them and saw continued evolution of the marketplace, we decided it was imperative we move quickly.”

The company plans to use the new capital to support new product innovation and to expand its team with the goal of building out its consumer base in the market that is expected to reach a value of $64 billion by 2023.

We’re thrilled that GoodBelly is joining the 301 INC investment portfolio,” said Haugen. “The digestive health space is emerging quickly, and we look forward to helping GoodBelly reach more consumers through its remarkable products and brand.”

-Lynda Kiernan