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Kellogg's looks to startups for 'next-generation innovation'Kellogg's looks to startups for 'next-generation innovation'

With the creation of eighteen94 capital, Kellogg Co. becomes the latest mainstream CPG conglomerate to launch a venture capital fund dedicated to investing in food startups.

Rachel Cernansky

June 28, 2016

2 Min Read
Kellogg's looks to startups for 'next-generation innovation'

Kellogg Co. last week became the latest mainstream CPG conglomerate to launch a venture capital fund dedicated to investing in startups. Called eighteen94 capital, the fund will make minority investments in companies pursuing “next-generation innovation,” specifically in the areas of new ingredients, foods, packaging and enabling technology. 

Eighteen94, which will be managed by Kellogg veteran Simon Burton, plans to invest about $100 million, divided into individual investments of varying sizes, and will help Kellogg achieve its 2020 growth objectives. The company wouldn’t specify any particular categories or demographics it is likely to target with its investments; Burton would only say: ”We’re seeking ideas that could lead to long-term, mutual growth opportunities. We plan to invest in companies pursuing next-generation innovation, bolstering access to cutting-edge ideas and trends. This includes small, upstart businesses pioneering new ingredients, foods, packaging and enabling technology.”

It’s clear, though, that Kellogg is getting on a bandwagon that has been led by skyrocketing consumer demand for healthy, fresh and specialty diet foods. Food tech startups have been attracting tremendous investments around the world, raising $5.7 billion in 275 deals in 2015, up 152 percent on a funding basis—but with Asia driving the vast majority of that, while funding growth in North America slowed in 2015. CB Insights reports the biggest increase last year came from two $100 million-plus rounds to meal kit delivery company Blue Apron and Impossible Foods, a plant-based foods company with plans to expand beyond its signature burger into other meats and cheeses.

The plant-based food business in particular has experienced explosive growth, enticing the General Mills-backed venture capital fund 301 INC to invest in Beyond Meat and dairy-free cheese maker Kite Hill, as well as others like vegetable snacks company Rhythm Superfoods.

Kellogg’s move to join the venture capital game demonstrates the seemingly unstoppable promise shown by the natural foods sector, and the fact that the mainstream CPG giants don’t seem able to innovate fast enough to capitalize on that growth on their own. 301 INC.’s vice president and general manager John Haugen told Adweek recently: “The team at Annie's gets a lot of credit for helping us get smarter across the new food landscape in the natural and organic categories… It's difficult for big companies to replicate the agility, passion and energy of these startups.”

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