The Barilla Group launched a venture capital fund and innovation hub called Blu1877, according to The Spoon. The name of the initiative reflects the color of Barilla's product packaging as well as the year the family-owned pasta company began business as a small bakery in Parma, Italy.
Blu1877 will provide investments and nurture innovations at Barilla's state-of-the-art pilot plant. Companies that work with the group will be able to test their ideas in small-batch production runs. They will also be able to access the company's extensive food industry expertise through a virtual network.
The first step for Blu1877 is making seed investments in innovators in products and meal solutions connected with Barilla's core business and related ones — pasta, sauces and Italian-style condiments — Blu1877 President and CEO Victoria Spadaro Grant, who is also Barilla's chief technology officer, told The Spoon.
With an investment focus on pasta and related products, Barilla is keeping its very successful core business in mind, yet also thinking outside the (blue) box. If the company's investments through Blu1877 end up adding value to any of those business areas — for example, through an interesting, tasty and popular new sauce that works well with its core product lines — it could be a win for all concerned.
Barilla is the largest pasta company in the world, according to Forbes. It has 30% of the U.S. market and sells $3.5 billion in products each year. With that kind of success and influence, Barilla is well-positioned to innovate, both in-house and otherwise. The company is heavily into R&D, exploring 3-D printed pasta and developing products in the organic, gluten-free, fast-cooking and meal kit areas.
The company clearly knows what it's about and is making investments in the right places. According to Euromonitor, global consumption of gluten-free pasta grew 89% in the past five years and is projected to expand by 43% by 2020, Forbes noted. Sales of organic pasta are up 53% since 2010 and are expected to grow by another 30% by 2020.
Barilla joins many other large food and beverage manufacturers in setting up a VC and investment arm to make strategic investments and help small startup brands get off the ground. General Mills started 301 INC about two years ago as a fresh twist on its business development branch, and it has since invested in eight brands. The unit now looks to help startups — many of which are in the growing natural and organic space — tap into General Mills’ wealth of knowledge.
“We really want to be that indispensable partner for growth,” 301 INC Vice President and General Manager John Haugen told Food Dive earlier this year. “… Brands all have needs, and we have great resources to help them grow.”
Kellogg Company also has a venture capital fund called eighteen94 capital. It launched last year and invested in several cutting-edge startups, most of which are in the natural products space. These include a mushroom protein firm; a company making blender-free, plant-based frozen smoothies; and a maker of nutrition bars, powders and beverages featuring the African superfood moringa.
Other manufacturers that make products in a niche also have VC arms. Land O'Lakes launched an incubator this summer. The dairy brand and agricultural cooperative hopes the incubator will foster innovation in the dairy space, which has recently been faltering.
However, these incubators aren't all necessarily like the one Barilla plans, which is intended to stay in the company's comfort zone of pasta, sauces and Italian condiments. Greek yogurt giant Chobani started an incubator in 2016. It supports startups that don't necessarily have anything to do with yogurt, such as chickpea pasta, frozen fish and saffron-based products.
While investing in startups obviously carries risk, the VC arm of a well-funded food company can bring in energy, new ideas, innovative products and eventual profits if it has good timing and the right strategy. It can also help an old brand align itself with fresh ideas and put it in the right spot for the acquisition of the next big thing.