The business plans to invest around $100m through the fund - called Eighteen94 Capital – by making minority investments that will increase Kellogg’s access to, in its own words, “cutting-edge ideas and trends”.
The company said the pace of innovation in the packaged food industry was continuing to intensify as consumers opted for more diverse tastes.
"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,” said Kellogg vice chairman Gary Pilnick, adding that businesses it invests in will have access to Kellogg resources and expertise.
Focus on early-stage businesses
Kellogg described the fund as “stage-agnostic” but said it would focus on early-stage opportunities with businesses that have demonstrated “good product and market fit and have generated initial revenue.”
It is aiming to invest in emerging businesses in Kellogg's core categories and adjacent categories, and in firms that have developed consumer-driven technologies that could bring long-term growth opportunities.
Eighteen94 Capital will be led by managing director Simon Burton, who has 10 years experience at Kellogg and is described as having “extensive investment experience in the consumer products sector and with start-ups.”
Touchdown Ventures, which specializes in partnering with businesses to manage venture capital programs, will help with management of the fund.
Campbell and General Mill investments
News of the Kellogg fund comes four months after Campbell Soup Co announced it was making $125m available through its new Acre Venture Partners fund to tap opportunities in the “fusion of food, wellbeing and technology.”
And last autumn, General Mills shifted its 301 Inc subsidiary from developing its own brands to investing in early stage food companies. It has since invested in businesses including snack food firm Rhythm Superfoods.
Firms continue to diversify
Market research firm Lux Research recently told this site that breakfast cereal manufacturers would continue to diversify through acquisitions and by switching resources to other parts of the breakfast market as sales of traditional cereals declines.
Lux research associate Joice Pranata told BakeryandSnacks that she expected major cereal manufacturers to make acquisitions into alternative breakfast food categories and suggested manufacturers move aggressively to diversify their portfolio, rather than defend existing product lines.
Businesses can contact the Kellogg fund through its website.
Snack manufacturer Pure Organic has announced it has joined the Kellogg-owned Kashi business.
Pure, which was founded in 2006, produces a range of organic, gluten free, vegan, kosher and non-GMO products including fruit & nut bars, ancient grain bars, and fruit & veggie snacks. They are sold in the US and Canada through retailers including Whole Foods, Trader Joes, Costco and Sam’s Club.
“Kashi is a great fit because they fell in love with Pure for the right reasons, and appreciate the values we stand for,” said Kashi founder Veronica Bosgraaf. “Kashi has the knowledge, resources and better distribution to create delicious organic food and get it to more people.”
The news follows a period of renovation for the Kashi brand, which Kellogg chairman and CEO John Bryant earlier this year admitted had been “a source of weakness for us for the last couple of years”.
The Kashi team has been given a lot of autonomy, Bryant told analysts in February, and had spent 15 to 18 months renovating and re-engineering the products so they are non-GMO verified, with half the range organic.
“We have taken steps to fix that and we are seeing progress,” he said, adding he expected the brand to be in full-year growth in 2016.