KANSAS CITY — Venture capital in the food and beverage industry shows no signs of slowing. Stalled for growth, the largest companies are funding early-stage start-ups to bring groundbreaking products to market. Among concepts capturing investor attention are convenient nutrition, plant-based foods and beverages, and functional ingredients.

“The old, established model, increasingly, is not working,” said Timothy P. Cofer, executive vice-president and chief growth officer of Mondelez International, Inc. “The way we innovate and the way we address a rapidly evolving consumer needs to change.”

That insight helped fuel the creation of SnackFutures, an investment hub that is operated as an independent unit within Mondelez. A key piece of the platform is collaboration with venture capitalists, entrepreneurs, scientists, accelerators and incubators to create “an unconventional ecosystem,” Mr. Cofer said.

Hu chocolate bars“We do not have all the answers inside the four walls of Mondelez,” Mr. Cofer said. “Obviously we bring some amazing capability, deep route to market, incredible R.&D., quite strong marketing prowess, digital capabilities, and we bring capital we can invest.”

Strategic areas of focus include well-being snacks and ingredients, premium snacks and ingredients, and digital platforms and capabilities. SnackFutures’ minority investments have included Uplift Food, an early-stage business focused on prebiotic functional foods, and Hu Products, a snack company that manufactures clean label, paleo-inspired products including coffee, chocolates and grain-free crackers.

“As the global snacking leader, we’re on a mission to lead the future of snacking and push the boundaries of what’s possible,” Mr. Cofer said. “Investing in Hu offers our company an opportunity to do exactly that. The Hu brand sits at the convergence of key growing consumer trends.”

Standing out to investors

Increasingly, the industry’s largest companies are launching venture funds, accelerators or incubators in pursuit of innovation. This past March, Starbucks Corp. announced a $100 million investment in a venture capital fund focused on food and retail technology, and Mars, Inc. unveiled a new business accelerator to nurture “the next generation of food innovators.” Product categories of interest to the company include flavors, plant-based foods, convenient meal solutions, “responsible food” and “creating with care.”

“Big food’s inability to quickly innovate creates continued opportunity for smaller, more nimble brands to disrupt and innovate within the market,” said Jon Sebastiani, founder and chief executive officer of Sonoma Brands. “While the landscape has certainly become crowded with these smaller brands, the truly innovative and differentiated brands will continue to excel and garner attention from strategics, propelling M.&A. activity.”

Krave teriyaki jerkyMr. Sebastiani founded specialty meat snack company Krave Pure Foods in 2009. The brand was acquired by The Hershey Co. in 2015. A year later, Mr. Sebastiani established Sonoma Brands, which is described as a “specialist growth equity firm exclusively dedicated to disruptive, high-growth consumer brands.”

“When looking for brands to add to our portfolio, we seek disruptive brands who are true category leaders or category builders within the better-for-you space,” he said. “We also seek to work with extraordinary founders and talented leadership who are passionate and have an authentic story to tell…

“The brand needs to stand out in the crowd and be a leader and innovator within its given space. The product must also provide the consumer with something new or different that other brands are not currently fulfilling. This can come in the form of providing a functional benefit, sexy packaging, new usage occasions, delicious taste or superior quality.”

Conversely, several factors may make for a bad investment, Mr. Sebastiani said, referring to “weak leadership, disorganized vision, a flailing category, lackluster branding or a product that is simply following a passing fad.”

Investors also should be wary of products that are too narrow in their appeal or “too early in the lifecycle and may not catch on,” said Mark Crowell, principal culinologist at CuliNex, L.L.C.

“Investors tend to gravitate to high-growth segments like beverages and snacks,” Mr. Crowell said, citing specific interest in “sugar replacers, upcycling, paleo, gluten-free, nut and seed milks, and vegetable protein products.”

Plant-based and beyond

Plant-based food and beverage businesses are a focus of Stray Dog Capital, which invests in early-stage companies that are focused on removing animals from the supply chain.

“Due to the nature of our thesis, we’re not looking for companies that have a product as good as the animal-based version, but rather ones that are better in taste, texture, price and/or process,” said Macy Marriott, a venture analyst at the firm. “Data are showing a notable consumer shift led by millennials and Gen Z in the form of flexitarians and reducetarians who are wanting to incorporate more plant-based options in their diet, and we’re seeking innovative products that fulfill that desire.”

Stray Dog investments include Good Catch, a maker of plant-based seafood alternatives; Miyokos Kitchen, a maker of vegan cultured nut cheese; and Goodseed Burger, a brand of veggie burgers made with hemp seeds. Another portfolio company, Ocean Hugger Foods, Inc. produces plant-based sushi ingredients made with tomatoes, carrot and eggplant.

Miyokos Kitchen roadhouse plant-based cheese spread

“The rise in plant-based eating has awakened the C.P.G. category,” Ms. Marriott said. “A 2018 Nielsen study found that plant-based product sales are growing across all categories. During the 12-month study range, alternative meat sales skyrocketed by 24%. This growth is great news for major players like Beyond Meat and Impossible Foods but also indicates plenty of room for new entrants.”

Stray Dog Capital also backs food technology companies using cellular agriculture and aquaculture or tissue engineering to produce meat without the need to raise or harvest animals. This is an area that has piqued the interest of the nation’s largest meat processor, Tyson Foods, Inc.

Through its Tyson Ventures business unit, the company is funding Future Meat Technologies and Memphis Meats. Both produce meat from animal cells.

“We continue to invest significantly in our traditional meat business but also believe in exploring additional opportunities for growth that give consumers more choices,” said Justin Whitmore, executive vice-president of corporate strategy and chief sustainability officer of Tyson Foods.

MycoTechnology productsTyson Ventures also recently invested in MycoTechnology, Inc., a company that uses mushroom fermentation to produce functional ingredients. Its first product, ClearTaste, is a certified organic bitter blocker that helps reduce sugar content in formulations. Another product, PureTaste, is a complete, digestible mushroom protein made from Shiitake mushrooms that has a slight cereal or nutty taste. It is low in calories, fat and carbohydrates and high in vitamins and minerals.

Eighteen94 Capital, a venture fund launched by Kellogg Co., also participated in the recent funding round for MycoTechnology.

“MycoTechnology’s innovative organic technology addresses growing consumer demand for products focused on health and sustainability, and Kellogg is excited to continue to partner with the company in a number of ways,” said Gary Pilnick, vice-chairman of Kellogg.

A showing of support

Another packaged food brand keen on supporting start-ups to solve industry challenges is Chobani. Barely a decade ago, Hamdi Ulukaya sold his first cup of Greek yogurt and helped create a multibillion-dollar category in the United States. Today, the founder and c.e.o. of Chobani is helping others launch food businesses through the Chobani Incubator.

However, unlike traditional investment models, Chobani receives no equity in exchange for its investments. Mr. Ulukaya views the project as an opportunity to “pay it forward” to other up-and-coming brands in the industry.

“Our selection criteria for the Chobani Incubator revolves around ‘DNNA,’ which stands for ‘delicious, nutritious, natural and accessible,’” said Zoe Feldman, director of Chobani Incubator. “Chobani was built on this idea of democratizing food; making it better for you and more accessible and affordable, and we want to help smaller companies that share our mission achieve their goals.”

Meat Hook sausagesLaunched in 2016, Chobani Incubator provides $25,000 grants and three to four months of on-site mentorship programming with company employees and executives, food industry thought leaders, retail partners and program alumni. Participating companies have included Banza, a maker of chickpea-based pasta; Misfit Juicery, a brand of beverages made with imperfect produce; and Snow Monkey, a producer of plant-based frozen desserts.

“When it comes to the product attributes, we look for entrepreneurs that create natural foods that share in Chobani’s DNNA and have solid growth potential over time,” Ms. Feldman said. “The Chobani Incubator is interested in all categories.”

The latest cohort includes The Meat Hook, a whole-animal butcher shop that sells meat from farms using regenerative agriculture practices; Cannonborough Craft Soda, a brand of sparkling beverages made with fruits, herbs and spices; and Afia Foods, a mission-driven maker of frozen falafel and kibbeh, among others.

“The market is extremely crowded, with an influx of capital that has entered the packaged food industry over the last three to five years,” Ms. Feldman said. “It is a very exciting space, and I’m encouraged by the landscape because so many new companies are bringing exciting innovation to the food and beverage space.”

301 INC, the venture and business development unit of General Mills, Inc., seeks to support companies that “obsessively put consumer needs first.” Consumers are looking for convenient, nutrient dense foods that may meet a custom wellness need, such as vegan or plant-based protein to help fuel a workout, or a probiotics-rich snack to promote healthy digestion, according to 301 INC.

“Truly buzzworthy products combine great passion, purpose and remarkability,” said John Haugen, the founder and managing director of 301 INC. “We are experiencing the biggest generational transition in food brand preferences in our lifetime; we’ll look back on this 10 years from now and remember what an amazing time is was to be in the food business. We all have a responsibility to take great ideas and work together to bring them forward, wherever you sit in the ecosystem.”