Specialty Food Magazine is the leading publication for retailers, manufacturers and foodservice professionals in the specialty food trade. It provides news, trends and business-building insights that help readers keep their businesses competitive.
Issue link: https://www.e-digitaleditions.com/i/1090132
New food entrepreneurs are grabbing the attention of consumers with their innovative food concepts, f lavor profiles, and use of "clean label," locally sourced products and natural ingredients. Their ability to respond to changing consumer tastes and introduce products that are leading the trends has enabled many startups to grab attention and market share from the established food companies. High-growth entrepreneurs have seen dramatic advances by focusing on three key strategies: 1. Penetrate micro markets—gyms, commuter sites, workplaces, food trucks. Several new food startups have focused on niche markets tradition- ally ignored by the large companies. Health-focused brands such as Kind and Rxbars have used gyms to sell their products to members pre- and post-workout. Farmer's Fridge developed fresh-salad vend- ing machines, placing them in favorite commuter sites such as train stations and airports to attract the mobile consumer. Food trucks are also venues for food innovations with leading food truck brands such as New Jersey's Oink & Moo BBQ and Ms. Cheezious in Miami. 2. Emphasize wellness and locally sourced. Consumers are seeking out new wellness product categories from sleep to diet to mental health, and startups have been able to penetrate these markets with authentic and unique offerings. Products such as Hippeas (chickpea-based snacks), Soylent (full meal replacement), and Nightfood (late-night ice cream) all have targeted specific niches within the wellness community. Going local, Chicago-based Here.co has developed a community of Midwest fruit and vegetable farmers to produce spreads and juices using locally sourced ingredients. 3. Maximize social media and community influencers. Without the resources to utilize TV, radio, or print media, small startups focus on social media and influencer marketing. Brands such as Red Bull (energy drink) and Casper (mattresses) have achieved tremendous growth through innovative and novel social media tar- geting. Social media influencers help build brand attention and share content that benefits their followers. Jamie Oliver (9.3 million follow- ers), Rosanna Pansino (3.9 million), and Hannah Hart (1.3 million) are some of the leading foodies and creators on Instagram, YouTube, and Facebook. Recently, the larger food companies have invested in business accelerators to take advantage of the innovative products and emerging entrepreneurs available. Both incubators and accelerators offer the new food entrepreneur access to a wealth of talent including expertise in capital markets, venture capital, packaging design, product formulation, marketing, retail penetration, and price and promotion advice. In addition to the access to expertise, many of the startups are hiring team members from large food companies that are looking for a change from the traditional corporate environment. CPG companies have responded by introducing their own incubators to attract both management talent and entrepreneurial ideas into their portfolios. Kraft, General Mills, Kellogg, Tyson, Campbell, Pepsi, and many others have introduced new corporate venture initiatives in the last two years. Want to quickly get exposure? Try a "shark tank." The new food competitions are modeled after the successful ABC television show that has aspiring entrepreneurs present their businesses to a panel of investors (sharks). The food industry has followed the same investor panel format with the introduction of investor challenges and pitches by Rabobank (FoodBytes), Family Farmed (Good Food Pitch Slam), and the Specialty Food Association (Front Burner Foodservice Pitch Competition). Food entrepreneurs now have many opportunities to pitch their products and build their skills through these various industry initiatives. All this activity has led to some remarkable new growth stories as well as notable acquisitions. In 2017 Rxbars sold to Kellogg Co. for $600 million and General Mills invested in healthy snacking startup D's Naturals and acquired a minority stake in Purely Elizabeth. Campbell Soup Co. acquired Pacific Foods. Cargill invested in lab-grown meat producer Memphis Meats. Conagra Brands acquired snack makers Thanasi Foods LLC, Bigs LLC, and Angie's Artisan Treats. Dean Foods invested in milk alternative producer Good Karma, Hershey Co. acquired Amplify Snack Brands, and Nestlé acquired Chameleon Cold-Brew and meatless frozen-food maker Sweet Earth. Today, large CPG companies are realizing that their biggest competitor is not the other brands, but the new startups and innovative entrepreneurs, and are viewing them as sources for renewed growth. Today, the dramatic shifts in consumer preferences are forcing large food companies to reconsider their traditional approaches to innovation and new product introductions. As they look to young food companies as sources of innovation, opportunities are opening for those that are rising stars with a strong following. SPRING 2019 75 Dave Donnan is a senior partner in the consumer goods and retail practices of A.T. Kearney, a lead- ing global management consult- ing firm. He can be reached at Dave.Donnan@atkearney.com.