Big Food Looks to Startups for Innovation

With a push for innovation and new ideas, even food companies are looking to startups.  Recently, General Mills has backed startups for new ideas they can release to their loyal customers. But it is not only General Mills jumping onto this latest trend of looking to startups for new ideas.  In fact, companies like Coke and Kellogg’s have already partnered with their smaller competitors to stay on top of their game.

What’s Pushing the Trend?

With a large number of high-profile companies investing in smaller companies, it is no wonder why many players in the food industries are following suit. But why are companies investing in startups? There are many reasons why large enterprises venture into smaller companies. First off, big food can offer lower supply chain costs and increased sales channels that it takes years for startups to gain traction in.

Larger companies can introduce new products their loyal customers without spending directly on staffing as well as research and development. General Mills, for example, has invested in startups like the New York-based company, Tio Gazpacho, to develop products that appeal to both wellness and health.

Startups As Looming Competitors

With more customers looking for innovative goods and services, it cannot be denied that many startup companies are becoming very competitive these days. Startups are growing threats to bigger players in the food industry. For instance, Coca-Cola has faced problems in their sales as more people opt to drink healthier beverages than the infamous soda. This is the reason why it established its venturing arm to invest in products with billion-dollar potentials such as brands like Zico coconut water and Honest Tea. Instead of competing with their small, budding competitors, big food manufacturers would rather buy, invest, and work with them.

Startups Are Not Selling Out

Both small and big companies can benefit from such arrangement. While large enterprises get new ideas and even expand their client reach, smaller brands can get the funding that they need to develop their products and their sales channels.

But more than revenue and expanding their consumer base, there are other benefits to this kind of arrangement.  For instance, when General Mills invested in smaller startups, it also transformed its product lines towards clean, healthy and natural options. Going towards, cleaner, healthier and more natural products is something that startups have been dominating in the past few years. In fact, the sales of healthier products have grown to 11% during the first period of this year, and 7.9% of the food sales comes from organic foods. Large food and beverage companies have overlooked this trend in the past but are now trying to win back by investing in startup companies.

Inspired by WSJ.com