With financial support from Silicon Valley and a growing distrust of ‘Big Food’ by Millennials, entrepreneurial companies are disrupting the food chain through product innovation, storytelling, and home delivery services.
For Zach Grannis, who leads business development for crowdfunding platform CircleUp Network Inc., San Francisco, a clue into a valuable investment strategy came in the form of a special report in Fortune. From the article published last May and titled “Special Report: The war on big food,” he learned that the equivalent of $18 billion in market share had moved from mass food brands to smaller rivals since 2009.
“A lot of that was driven by a fundamental shift from what my parents and grandparents purchased from legacy companies like General Mills and Proctor & Gamble to small startups that captured a lion’s share of consumers,” Grannis declares. “The younger generations want a more personalized experience.”
The market forces supporting the emergence of these disruptive food companies or renegades is driven by a large pool of Silicon Valley investors and resources like incubators and accelerators with an interest in food. CircleUp exists as one of those platforms with a rule that they won’t invest in tech or Internet companies, but only organizations that have a tangible product that consumers can touch, taste, and is sold on the shelf or online. These are the characteristics that new brands use to pique interest from members of the investment community.
Millennials and Moms
Driving the cultural shift to smaller brands are Millennials, who represent a quarter of the U.S. population and who are the most culturally diverse. With their smartphones and quick access to Google and blogs to investigate any company or ingredient, they’ve all but created a whole new type of food customer. While younger Millennials may still be going through college and waiting to get their feet on the ground before getting married, market researcher Mintel reports that older Millennials are starting families and gaining greater incomes and increasingly more influence over food trends.
Recent research from Mintel (2015a) indicates that 43% of Millennials do not trust large food manufacturers, compared to only 18% of non-Millennials. Similarly, nearly three quarters (74%) of Millennials want food companies to be more transparent about their products. “With growing distrust and a greater desire for transparency from food manufacturers, Millennials want brands to form a genuine, authentic connection with them,” notes the research report.
One brand that serves as an example of how small companies are capturing the attention of Millennial moms is Pure Spoon—a maker of organic food purées for children. Founder Alyson Eberle has used social media and blogs to market her own story. After becoming a mom herself, she sold her 15-year-old education business and sought out the means of investing in innovative packaging and high-pressure processing (HPP) pasteurization technology to provide “fresh” baby food products that are not heat treated. She says that her company’s ability to compete with mass brands like Gerber is the difference in the taste and nutrition. Her company, which is itself still in its infancy, has now catapulted in growth since being picked up by big grocery retailers like Whole Foods, Target, Fairway, and Sprouts.
“The idea of Pure Spoon came about when I had my daughter and I made all of her food at home, which, as every parent knows who has done this, is a lot of work and time,” Eberle says. “But because there was not a fresh option available, my choice was to keep making it or settle for a product offered in a pouch or jar that sits on shelves at room temperature for months at a time. So I decided to take on the established brands and give parents a better, fresher, less-processed, more nutrient-packed option. I think that resonates well with parents who want the best for their kids.”