Kellogg's investment arm, eighteen94 capital, is investing in Cargo, a New York City startup that provides ride-share drivers with snacks for their passengers, according to Bakery and Snacks. After drivers order a free box of products to install in their vehicle for display, passengers can place their orders for a mix of complimentary and retail items via Cargo’s mobile website, according to Forbes. Drivers receive a 25% commission on each paid order.
Participating brands pay a marketing free in addition to providing free products, and they gain anonymous data about when their items are taken, according to Tech Crunch. Manufacturers can use this information to identify peak selling periods for their products. Jeff Cripe, Cargo's founder and CEO, noted while his company does have some Kellogg products, it has no arrangement to sell additional Kellogg snack brands — such as Rice Krispie Treats or breakfast bars — since the VC arm is a separate company.
Between eighteen94 and CRCM Ventures, its first investor, Cargo has raised $5.5 million to help expand its business, according to Bakery and Snacks. Cargo currently distributes products from Kellogg, Mars, Michel et Augustin, Emergency Stain Rescue and Leaders Cosmetics USA, according to the company website.
Forbes likened Cargo's service to installing a convenience store in ride-share vehicles, as the products offered include snacks, energy drinks, charging cables and over-the-counter medications. Since the ride-share market is projected to jump from $36 billion to $285 billion by 2030, Cargo could provide an important distribution channel for snack companies — giving them convenient access to both current and new customers.
Kellogg has seen declines in its breakfast and snack segments, so any opportunity to boost visibility and purchases of its products — such as RXBAR, which it bought last year — would no doubt be welcome.
Kellogg has been focusing lately on direct-to-customer marketing such as e-commerce and other digital approaches after ending its direct-store delivery for it snacks division. The ride-share approach seems to advance that strategy.
The company's VC fund has also put money into MycoTechnology, a Colorado-based organic food technology company. The four-year-old firm's major products are a bitter blocker called ClearTaste and a vegan Shiitake mushroom-based protein called PureTaste. The protein is said to be low in calories, fat and carbohydrates, and high in vitamins and minerals, while ClearTaste could reduce the need for excess sugars and alternative sweeteners in certain food products.
Other big food company VC arms have been busy investing in startups to potentially diversify and expand their portfolios. General Mills' 301 INC just invested in Urban Remedy, a fresh juice and ready-to-eat plant-based meal firm based in California. It also has invested in Rhythm Superfoods, a maker of kale, beet and broccoli chips.
Such deals give Big Food companies a foothold in a potentially promising product launch or expansion while avoiding the need for a large, in-house investment that might not work out. In the case of Kellogg and Cargo, the bet doesn't seem like a huge one, but there's a chance the payoff could be.