November 16, 2017

Italian pasta brand giant Barilla has launched Blu1877, a new hybrid venture capital fund and innovation hub designed to foster the growth of food-based startups focused on categories that are related to, or tangential to Barilla’s business.

Much like Kellogg’s eighteen94 venture fund, which was named in reference to the year the company was launched, the name of Barilla’s new investment arm, Blu1877, is in reference to the iconic blue box in which its pasta is packaged, and the year the company began as a bakery in Parma, Italy.

The company has allocated an undisclosed amount that it initially intends to commit as seed-stage investments in innovative startups engaged in related areas to its core business and meal solutions, Victoria Spadaro Grant, CEO, president, and CTO of Barilla, told The Spoon. These categories include pasta, sauces, bakery and fruit-based products, the Mediterranean diet, and condiments that are complementary to Italian cuisine that can generate value along the entire supply chain.

Diverting from the venture capital pure-play structure a bit, along with the fund, Barilla is also  launching an innovation hub called the Open Innovation Hub, that will give its chosen cohorts of startups access to advice and expertise from a network of advisors and mentors regarding product development, safety, packaging, marketing, quality and food regulations. Startups also will have the ability to use Barilla’s advanced food research lab, design thinking space, and its 100,000-square foot pilot facility where innovators may produce small-scale production runs of new products on an experimental basis.

Common Core

The move to launch venture capital arms and accelerator programs or incubators has become a widely used method by some of the world’s largest and most conventional companies to achieve diversification, and gain a foothold and establishing relevance in a swiftly changing consumer market. CPG companies also use these programs as a means to stay a step ahead of their competition and independent venture capital firms that are realizing the growth potential in disruptive food innovation.

The strategy of incorporating venture capital and innovation accelerator programs as a tool into an iconic company’s growth objective has become so widespread that the list of names continues to grow.

Indeed, the strategic move of launching a venture capital unit has the potential to be mutually beneficial to both the investor and the startups involved – giving the investor the ability to foster research and development that can boost their existing business while also fostering the commercialization of innovative technologies and products without assuming the entire risk. Meanwhile, if certain startups are successful, the initial investment gives the investor a proprietary stance in regard to a full acquisition at a later date.

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.

Other venture capital units launched by global CPG companies include the $125 million Acre Venture Partners launched by Campbell’s Soup, Eighteen94 (1894) Capital launched by Kellogg’s, Startup Next Food & Tech, which was launched by Land O’Lakes in partnership with Techstars, and Techstar Connection, launched by AB InBev’s venture arm, ZX Ventures, also in partnership with Techstars.

Grupo Bimbo, the Mexico-based bakery goods giant, announced the formation of Bimbo Ventures – an in-house investment arm designed to source and drive highly potential ventures in the food and food tech space, earlier this summer – and in December 2016 Tyson Foods announced the launch of Tyson New Ventures LLC, a $150 million venture capital fund dedicated to investing in food companies developing technologies, products, and business models that answer the challenges posed by a growing global population.

“…the rate of innovation across our industry has picked up dramatically,” said eighteen94’s Managing Director Simon Burton upon the fund’s launch. “Things are changing quickly, and investing is a great way to get a sense of what’s going to be important in the future.”

Possibly the most active of these funds is General Mills’ 301 INC. Formally launched in October 2015, 301 INC was a testament by General Mills, the maker of iconic Cheerios and Lucky Charms, among many other popular brands, that there was a shift occurring within the food sector that was creating a scenario in which Big Food needed the rapid-response innovation generated by startups as much as startups need the capital available from Big Food.

-Lynda Kiernan