After paying more modest but still high price tags for smaller but stable companies, many of them partially owned by venture capitalists, Big Food companies developed a second strategy: start their own venture capital funds. 301 Inc., formally named by General Mills in 2015, may have been the first, although Coca-Cola and PepsiCo had similar although informal funds in operation. 301 was followed within a year by Campbell Soup (which started Acre Venture Partners), Hain Celestial (Cultivate Ventures), Kellogg (“1894”), Barilla (Blu1877) and Tyson (Tyson New Ventures).
These in-house venture capital programs may pay off, but slowly and in small ways. But shareholders and activist investors want results now. So there is some serious realignment going on among the big food companies.
Danone wants to be the world leader in plant-based foods, and it acquired WhiteWave to move it closer to that goal. Nestle wants to provide health-imparting foods and beverages, so it jettisoned its North American candy business last year. Hershey wants to be a snack food company, not just a candy company, so it bought Amplify Brands, maker of SkinnyPop.
Mars hasn’t abandoned candy, but pet food is now the company’s biggest product category following a string of acquisitions this millennium.
And some are simply divesting, intentionally shrinking themselves into more focused companies, in many cases going back to their roots.
Campbell Soup went off in a number of different tangents under CEO Denise Morrison, but the interim CEO put most of those on the selling block to focus on soup and the North American market. New, permanent CEO Mark Clouse, who just started this month, is expected to continue that strategy.
Like Campbell, Kellogg has new leadership that, like Campbell, is trying to undo recent purchases to focus on breakfast (not just cereal) and the domestic market. Kellogg is shopping its cookie and fruit snack brands, such as Keebler and Famous Amos, to concentrate on core products.
Hain Celestial, too, has endured a couple of difficult years and also has a new CEO. Mark Schiller in October replaced the only CEO the 25-year-old company has had, founder Irwin Simon, and appears poised to sell off underperforming and tangential assets to focus on natural foods.
So, by the end of 2019, some of the top companies will look very different than they have recently, with some looking like they did decades ago.
Stay close to home
With trade wars, global economic uncertainty and souring relations, the world has become an inhospitable place for American food and beverage companies. As a result, some companies are doubling down on domestic sales.
Among the first things Campbell Soup put up for sale was its international business, which included biscuit-makers Kelsen in Europe and Arnott’s in Australia, along with the company’s manufacturing operations in Indonesia and Malaysia and operations in Hong Kong and Japan. In October, Kraft Heinz agreed to sell multiple Indian businesses to Zydus for $628 million. Two years ago, most multinationals wrote off all their assets in Venezuela.
President Donald Trump’s well-publicized tariffs on certain countries’ goods set off retaliatory tariffs on a wide range of U.S. products, including food – both farm commodities and processed food. The immediate effect was to cause commodity prices to drop in the U.S., which is bad for farmers but potentially good for processors – at least in the short term. But if higher-value/more processed U.S. foods are targeted, it won’t be good for Big Food.
Speaking of the home turf, U.S. consumers expect more from their food and beverage companies. More variety, more food safety, more social responsibility, and they’re willing to pay for it. A lot of trendspotters use the term “conscious consumption.” It encompasses personal health, sustainability, authenticity, organic production, animal welfare, a concern for the viability of producers both at home (the local movement) and across the globe (a living wage for cocoa farmers in Ivory Coast). Read more about conscious consumption in our Formulation Trends article.
And all that requires transparency. The term seems to evolve a little, and grows, each year, but clearly indicates people want to know more about their food. Food & beverage companies are bigger and more “corporate” than ever, and consumers are further removed from farms than ever before. The successful companies will work in 2019 to bridge that gap.