The Campbell Soup Company has announced that it is launching a $125 million venture capital (VC) fund to invest in food startups. The fund, under the banner Acre Venture Partners L.P., will be managed by unidentified outsiders independent of Campbell, although the food giant is its sole limited partner.
“We believe that defining the future of real food requires new approaches, new business models, smart external development and an ecosystem of innovative partners,” Campbell CEO Denise Morrison said during the announcement at the industry’s Consumer Analyst Group of New York (CAGNY) event on Wednesday.
Fortune reported that the strategy is not unheard of: General Mills launched a VC fund last year, although its investments are being managed internally by a business unit called 301 Inc. The company owns a minority stake in plant-based food maker Beyond Meat.
While Campbell has only previously invested through acquisitions, several have cost drastically more than the $125 million the company is investing in Acre Venture Partners. For example, in 2015, Campbell acquired salsa, hummus and dip maker Garden Fresh Gourmet for $231 million, and back in 2012, agreed to buy beverage business Bolthouse Farms for $1.55 billion.
‘Big Food’ companies are struggling to grow amidst slow economic markets and the US’ shrinking middle class, which is a key segment for companies like Campbell, according to Fortune.
“Morrison said Acre is a new model for innovation to help the 145-year-old soup-and-snacks company keep pace with what she calls a seismic shift taking place in the food industry,” Annie Gasparro wrote in The Wall Street Journal. “Morrison said e-commerce and the increased availability of food manufacturing lines have lowered the barrier of entry for startups. These smaller companies have largely responded faster to consumers’ demand for transparency as to what is in the food, and other trends like simpler and fresher ingredients.”
For similar reasons, Campbell recently pledged to disclose genetically modified organisms (GMOs) on all of its labels.
“We recognized that people, even our own employees, are questioning food,” Morrison told the analysts at CAGNY.
Indeed, the growing consumer demand for “freshness” and transparency is steadily increasing the pressure on food companies. Consumers want to know how their food is grown, why certain ingredients are used, and whether they come from a sustainable source.
Among the most recent examples, Mars, Incorporated pledged to remove artificial colors from all its food products within 5 years, and Wendy’s launched a marketing campaign that focuses on its local sourcing practices. Meanwhile, startup Clear Labs has been able to leverage a business opportunity from it: the company compares food products using DNA testing and releases reports on the results for consumers, in addition to offering the testing service to food companies for quality assurance purposes.