Hungry for Innovation, Big Food Firms Seek Alliances With Startups

Big Food is getting serious about innovation.

Many top food companies are increasingly pumping money into supporting young, innovative startups, according to a recent analysis by CB Insights. The firms include stalwarts like Kraft Heinz (NASDAQ: KHC), which has an incubator and accelerator program called Springboard, and relative newcomers like the Greek-style yogurt maker Chobani, which operates an incubator that makes $25,000 investments in startups with no equity stake.

“The big guys are starting to figure out that they can’t really innovate well enough within their own organization,” says Robyn Metcalfe, director of Food+City, a multi-departmental effort at the University of Texas at Austin that is looking at how to use technology to recreate our food system.

They’re not targeting innovation just for innovation’s sake, either: The top 25 food manufacturers in the U.S. have seen sales decline from 2012 to 2015, according to a report by AT Kearny. This slide has occurred as mid-sized and small competitors are seeing double-digit growth, the firm reported.

Consumers are increasingly coming to the point of view that smaller companies more closely share their values when it comes to sustainability and healthful products, according to the report.

“Viewpoints and products that once were the domain of co-ops and local health food stores have gone mainstream,” the report states. “The market has shifted from previous decades’ focus on diet foods to a focus on real food as a way to maintain health.”

Many of the big food funds in CB Insights’ analysis have already backed startups. Arkansas-based Tyson Foods (NYSE: TSN), for example, invested several months ago in two plant protein startups, Beyond Meat and Memphis Meats, which makes a plant-based protein and a protein from cultured animal cells, respectively, through its Tyson New Ventures fund.

These companies are not just looking at the future of food … Next Page »

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Angela Shah is the editor of Xconomy Texas. She can be reached at ashah@xconomy.com or (214) 793-5763. Follow @angelashah

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