When Is Big Food Not Big Food? When It’s Funding Your Favorite New Snacks
For young, hip New Yorkers who’ve cast off the vestiges of their suburban childhood, Tio Gazpacho would appear to be right up their alley. Not only is the drinkable chilled soup made using “only the best ingredients,” according to the product’s website—including vine-ripened tomatoes and Himalayan pink salt (“as opposed to table salt”)—but it ticks off any number of good-for-you/good-for-the-planet boxes that have become de rigueur for discerning millennials. The soup is gluten-free, dairy-free, soy-free, and free of chemicals, preservatives, artificial colors and flavors, “and additives of any kind.”
In short, Tio Gazpacho would seem to be about as far as you can get from, say, the canned Progresso soups your mom served for lunch when you were a kid.
But how far is it, really?
As Tio Gazpacho’s founder, Austin Allan, embarks on plans to expand beyond the New York area and add gazpacho flavors to his lineup, he’s got some big-time support from a big food giant: none other than General Mills, the company behind such center-aisle grocery brands as Hamburger Helper, Pillsbury, Old El Paso, and yes, Progresso.
As USA Today reports, Allan’s funding came via 301 Inc., the business development and venture capital arm of General Mills. If seeing the words venture capital and General Mills in the same sentence surprises you, well, welcome to 2016.
Whereas just a couple years ago, big food hardly seemed like the place to look for innovation beyond yet another overhyped hybrid flavor of Lay’s potato chips, today food giants like General Mills are increasingly searching out the next hot food start-up.
Headline-grabbing start-ups such as Hampton Creek, the company behind egg-free Just Mayo, have succeeded in wooing some of Silicon Valley’s biggest V.C. firms, and now what might be called “old food” companies, like General Mills and Campbell’s, want in on the action.
All in all, food-related start-ups are raking in more than $2 billion a year in venture capital funding, according to Entrepreneur magazine. Getting an exact—or even not-so-exact—idea of how much V.C. money big food is pouring in is hard, given the industry’s penchant for secrecy. But, according to USA Today, General Mill’s V.C. arm led a $1.25 million funding round for Tio Gazpacho and a $3 million round for Rhythm Superfoods, which makes wholesome veggie snack chips.
Just this week, news leaked that former White House nutrition guru Sam Kass had signed on as a partner at Acre Venture Partners, a $125 million venture fund that is a backer of Juicero, the pricey must-have cold-press juice maker. Oh, and who’s behind Acre? None other than Campbell’s.
Big food’s big V.C. splurge on up-and-coming brands that cater to consumers’ growing preference for foods they perceive as healthier and more sustainable isn’t a surprise. Giant food makers have been buying up “alternative” companies for a number of years to compensate for the sluggish sales growth of their core brands. General Mills now owns such organic staples as Annie’s, Cascadian Farms, Food Should Taste Good, Immaculate Baking, and Muir Glen.
Should consumers who are willing to plunk down $8 for a bottle of chilled Tio Gazpacho at least know that a company like General Mills has a stake in the brand?
Allan takes a more sanguine view. Speaking to USA Today about General Mills’ investment in his company, he said, “It helps them reach new consumers, and it helps them stay relevant. I see that they’re moving in the direction of where food is going, and we want to be a part of that. We want to help them on that journey.”
Yet, in the next paragraph of the story, the newspaper reports that in addition to using the investment to fund sales and marketing, Allan plans “a less expensive line of soups that don’t rely on pricey organic tomatoes.” This could be a slippery slope that leads to Progresso.