BALTIMORE — What’s next for 301 INC, the business development and venturing unit of General Mills? In its first year, the investment group has partnered with five food start-ups spanning a range of product categories, with portfolio brands including Beyond Meat, Rhythm Superfoods, Good Culture, Tio Gazpacho and Kite Hill.
|John Haugen, vice-president and general manager of 301 INC|
“Our first order of business right now is supporting the partners we have in place; that really has to be job one,” John Haugen, vice-president and general manager of 301 INC, told Food Business News. “But beyond that, we’re absolutely looking and very actively searching for the next opportunities.”
301 INC, which takes its name from the address of the original Pillsbury mill, was launched last October, seeking businesses that have demonstrated early success, have a strong product offering and an expandable brand. The initiative was established in 2012 as a new business development team within Minneapolis-based General Mills. That group identified ideas that were later used to introduce such new products as Progresso and Nature Valley Bistro Cups, Pillsbury Pancake Batter, and nibblr, a subscription-based snack service.
During an interview at Natural Products Expo East, held Sept. 21-24 in Baltimore, Mr. Haugen discussed recent investments and trends in the marketplace, including increased competition from emerging venture capital firms. In the past year, such food companies as Campbell Soup Co. and Kellogg Co. have launched venture capital funds to invest in natural and organic start-ups.
“As it relates to other strategics, I suppose the marketplace will continue to get more crowded, and I think it’s probably because companies are looking for new ways to grow,” Mr. Haugen said. “I think the question moving forward is, what’s it going to take to be the partner of choice?... I can’t speculate on how other strategics might be approaching it. All we can do is control and focus on our approach and really being that indispensable partner for growth. And that’s a story that’s told over time.
“We’re off to a promising start with the five brands in our portfolio today. We’ve got a long ways to go, but we’re learning rapidly about what seems to be doing well, and we learn every day things we can do better.”
Soup to nut milks
A common link across 301 INC’s five portfolio companies is category disruption. Take Tio Gazpacho, a maker of chilled, ready-to-drink vegetable soups, which closed a $1.25 million Series A funding round led by 301 INC in March. The product offers a twist on traditional soup by bringing fresh flavors and portability to the marketplace.
“We’re really excited about some of the opportunities that can come off that platform,” Mr. Haugen said. “We’ve been working with Austin (Allan, founder of Tio Gazpacho) for roughly six months to continue to build that out, and I think some really exciting things are coming down the pike in 2017.”
Two months later, 301 INC was a lead investor in an $18 million fundraising round for Kite Hill, a maker of plant-based dairy alternatives such as cultured almond milk cheese, cream cheese-style spreads and yogurts.
“Usually if you say ‘vegan’ and ‘cheese’ in the same sentence, you’re going to get a dirty look from people,” Mr. Haugen said. “There has not been a product that’s delivered on taste.”
The brand’s products, made using traditional cheesemaking techniques and a proprietary almond milk formulation, deliver a similar taste and texture to that of traditional dairy, Mr. Haugen said.
“There are a lot of people who are not vegan but who are still looking for specific occasions to reduce or avoid animal protein,” he said. “People who are flexitarians, lessitarians… I think it’s absolutely tipping right now.”
More recently, 301 INC increased its investment in Good Culture, a maker of organic cottage cheese, in a $3 million round of strategic funding, which followed a $2.1 million round in March. Good Culture offers sweet and savory varieties of single-serve cottage cheese made with organic whole milk from pasture-raised, grass-fed cows and is free of stabilizers and additives.
“Whether you’re a Kite Hill or a Tio Gazpacho or Good Culture, you have a vision to get these products into the marketplace, and the role we play is intended to help them get there more efficiently, likely faster and more effectively,” Mr. Haugen said.
In addition to helping brands expand distribution, 301 INC leverages its resources and capabilities within General Mills to accelerate new product development. Recently, the company helped portfolio brand Beyond Meat, a maker of plant-based beef and chicken substitutes, launch a line of frozen single-serve meals.
“It’s one of many opportunities in terms of what we’re doing on operation and supply chain and product quality and sourcing and marketing and communications; all of those things are part of a pretty vast toolkit that we can tap into because we have access to those things at General Mills,” Mr. Haugen said. “But what really triggers all of that is the relationship we build with our portfolio brand, and it really is incumbent upon how we work with them to define that. You don’t want to come and give them 10 things that they didn’t need or ask for. So it’s really getting on the same page.
“We don’t run their business. We don’t tell them how to run their business. We work with them to understand their business and how they run it and ask, ‘What are some resources we can bring to help you do that?’ It has to be different for each partner. It’s not a cookie cutter approach because you want to make sure you can really customize that whole approach. I think all of those things should be in scope as we’re looking to build these vibrant partnerships.”
Looking ahead, Mr. Haugen said the 301 INC team is interested in brands that offer “real food, closer to the source, less processed, nutrient dense.”He added, “I want us to be open to following the consumer and finding where those gaps are and be a bit more flexible on those specific categories. That’s how we’re mining the field right now.”