Kellogg Co. is ready to back smaller food-industry companies seeking funding for growth as it looks for fresh ways to grow its own sales and profits.
The cereal marketer said Monday it has established eighteen94 capital to make minority investments in innovative businesses, thereby giving the company better access to hot ideas and trends. The name eighteen94 is a reminder of the year brothers W.K. and John Harvey Kellogg accidentally figured out how to make flaked cereal, ultimately leading to its famous Corn Flakes and other cereals.
"The investment mandate includes start-up businesses pioneering new ingredients, foods, packaging, and enabling technology," Kellogg said in a statement, adding that it plans to spend about $100 million on investments.
The move comes as traditional packaged food makers continue to face pressure from more nimble startups. At the same time, cereal in particular has had a tough time remaining relevant to some diners who would rather grab a cup of yogurt or stop at a restaurant for a breakfast sandwich.
Kellogg is the latest consumer products maker looking to fund smaller, entrepreneurial startups. Among the other players already publicly searching for fresh ideas, General Mills has its 301 INC unit that works on partnerships with emerging food brands and Campbell Soup announced a $125 million contribution to back Acre Venture Partners in early 2016.
"As consumer preferences move toward more diverse tastes and trends, the pace of innovation in the packaged food industry continues to intensify," Kellogg Vice Chairman Gary Pilnick said in a statement. "By investing directly in the most promising entrepreneurs and ventures, we can increase greatly our access to game-changing ideas and trends that could become significant sources of growth for us."
The venture capital project will be led by Managing Director Simon Burton, who was most recently Kellogg's VP-investor relations. Touchdown Ventures, which works on corporate venture capital, will help manage the fund.
For startups, connecting with a major company such as Kellogg can give needed funding as well as access to industry expertise and resources that are hard to come by on their own. Kellogg said it would like to work with early stage companies that have generated revenue, but said its approach is "stage-agnostic."
Kellogg has long looked outside the company for growth. It bought Kashi in 2000 and 12 years later added Pringles to its portfolio as it made a bigger bet on snacks. Still, the company's portfolio could use some added energy. Sales and profit fell again in the first quarter after declining in the prior fiscal year.