Venture capital investment in food startups has been on the rise in recent years, with companies sinking millions into meal kits, food delivery services, and other new products. Kellogg's latest project is proof that the trend shows no sign of slowing.
On Monday, the cereal giant announced the launch of a new $100 million fund which will invest specifically in food projects. As Fortune reports, "the idea is to take minority stakes in those newer, smaller firms to help support their growth — mainly through the expertise Big Food makers like Kellogg can bring to packaging, marketing and distribution."
According to a press release, the fund, called Eighteen94 Capital, will invest in "emerging businesses in both Kellogg's core categories and adjacent categories, and in companies that have developed new consumer-driven technologies that could lead to long-term, mutual growth opportunities." It will play an integral role in achieving Kellogg's strategic growth objectives — and significant growth is much needed at Kellogg. With cereal sales eroding in recent years, investment in new ideas may be the company's only hope for growth.
"As consumer preferences move toward more diverse tastes and trends, the pace of innovation in the packaged food industry continues to intensify," said Gary Pilnick, vice chairman of Kellogg, in the release. "By investing directly in the most promising entrepreneurs and ventures, we can increase greatly our access to game-changing ideas and trends that could become significant sources of growth for us."
Fortune points out that 301, the VC fund from Kellogg competitor General Mills, “has made a handful of startup investments in recent months, including backing cottage cheese maker Good Culture, plant-based food maker Beyond Meat, and kale chips brand Rhythm Superfoods.”
As consumers are increasingly turning to healthier options (as opposed to sugary, processed cereals), it’s perhaps unsurprising that VC investment has largely been focused on startups with an emphasis on nutrition. There are several VC funds and accelerators that focus specifically on food these days and millions of dollars in equity funding continues to flow into healthy meal kits, coffee, and other food-focused startups.