How should big food companies work with startups to accelerate the innovation process and where do corporate venture funds and accelerators fit in? Are legacy ‘Big Food’ companies increasingly becoming scale up platforms for smaller, more agile companies’ innovations, or can they still come up with disruptive ideas in house?
The key is understanding the strengths and weaknesses of large and small companies, and coming up with models that create a win-win for both parties, says Dr. Ian Noble, VP R&D at snacks and confectionery giant Mondelēz International, which has just unveiled the 10 startups participating in its 2024 CoLab Tech accelerator program.
But it’s easier said than done, he admits, acknowledging that Mondelēz’s initial plan for its SnackFutures business has evolved over the years from a venturing and innovation hub that would also incubate novel products in house (Dirt Kitchen, CaPao, Ruckus & Co, Millie Gram, and NoCoé – which have all been quietly phased out) to a more traditional corporate venture fund: SnackFutures Ventures.
‘If I commit five people to this [tiny novel brand], would I get a better return if I committed them to Cadbury?’
Initially, SnackFutures was “building ideas, building new possibilities [with a dedicated team in-house],” says Noble. “But the pathway to getting those to scale takes time, and that remains a challenge because you’re committing resources. And that’s always the tension. If I commit five people to this, would I get a better return if I committed them to [a multinational, multibillion dollar brand also in the Mondelēz portfolio such as] Cadbury?”
“We did some very, very cool stuff in house with SnackFutures, but the way I see it now is we’re looking very much at that middle ground space where companies know they’ve got something that’s working and can scale, and then it’s a case of how do we [at Mondelez] help them transition to that next level? How do we bring our expertise, our capability, to help them accelerate their business, but also understand their business and see the possibilities?
“And then ultimately, if that leads to a potential M&A, that’s great, but if it doesn’t, ultimately, it’s about us being an active player in the ecosystem, seeing what’s out there.”
‘Disruptive’ innovation: ‘Everyone remembers the successful startups, not the thousands that failed’
At base, says Noble, who honed his skills at Unilever and PepsiCo before moving to Mondelez in 2016, large consumer packaged goods (CPG) companies and startups have fundamentally different priorities and responsibilities.
“As a [multibillion dollar food business], you’ve got a business and brands that are already performing. You’re looking to polish, improve, tighten, sharpen, and if you bring them [big and small companies] together in the wrong way, the bigger one tends to kill the smaller ones.”
And while “disruptive” innovation sounds sexier than nurturing established brands, it should be placed in context, he says. “Everyone remembers the successful startups, not the thousands that failed, and if you invest in them or acquire them, you need to treat them as distinct [from the mothership]. And then it’s a question of phasing and timing [as the relationship between the two gets closer so the smaller company is not crushed under the corporate umbrella].
“The behaviors that keep an FMCG company rolling at 3-5% or whatever percent growth, are a very different set of skills that keep a startup moving from the first sale to the first million to the first 10 million.”
Big brands are capable of coming up with big innovations, he says, “Look at [innovations developed in-house by big brands] such as Nespresso (from Nestlé) and probiotic mini-drinks (from Danone). But is it their number one role? I don’t think it is. I think the big companies have a duty to care for and nourish, maintain, and sustain their brands.”
Stepping back, he says, “We also need to shift how innovation is defined. It’s not just about products. It’s about distribution, business models, technologies to deliver better consumer experiences.”
A lot of the innovation that goes into creating and distributing huge legacy brands is not necessarily consumer facing, meanwhile, but “enables the lowest cost food that we have today, the most accessible food, the safest food,” he points out. “It’s not sexy, but it’s what matters.”
Crossing the valley of death with the CoLab Tech accelerator cohort
As for the CoLab Tech accelerator, now in its second year, he says, “This is more of an investment play and helping companies get to scale in an area where we need solutions, so anything from sustainable packaging (Yangi, Outlander Materials) to more efficient mixing (hs-tumbler).”
He adds: “Innovation is a journey, and you have to cross the valley of death, which goes back to the basic question: why do you guys get involved? It’s because they need help making these transitions. So take something like plant cell culture [the area of focus at CoLab Tech cohort member Kokomodo], which been around for a long time. Will it deliver a comparable price point to farm grown materials on day one? No, but otherwise it would be [an] M&A [candidate].”
Another CoLab Tech cohort member hs-tumbler, which is pioneering a new type of mixer that shakes, rather than stirs, materials, has proven tech but needs help scaling up, says Noble: “These guys have looked at mixing and asked the question: could we do it in a fundamentally different way? And they’ve come up with a solution that is just so disruptive. Yes, it requires energy, but then you start looking at mixing times and wow, it’s super quick, so the efficiency is there. Then the question is how do I scale it? And it’s not necessarily a case of just getting bigger.”
At fellow CoLab tech cohort member enginzyme, meanwhile, the team is developing cell-free technology that enables the production of high-value ingredients from lower-value starting materials via enzymatic biocatalysis. The enzymes are immobilized using proprietary tech such that they can be re-used again and again, enabling firms to switch from a batch to a flow process, potentially slashing costs. The end products can then be produced more easily and cheaply than they might be via precision fermentation, he says.
While classic chemistry uses a lot of energy and petroleum-derived starting materials, including rare metals that serve as catalysts, bio-based chemistry is potentially more efficient,” Noble said. “Cell-free bio-based chemistry even more so than fermentation, because it eliminates the need to keep delicate microbes alive. If you don’t need it to do that, you can be more efficient. You can just focus on the efficiency of the enzyme, on creating what you want to create. So that is really interesting to us, as one of the ingredients enginzyme is working on is a [low-glycemic, lower-calorie] sugar.”
In general, he says, “Our job is to help them [CoLab Tech members] to scale faster, but we’re very respectful of their IP, that’s the very kernel of their business. We’re still in touch with a number of the [inaugural] CoLab Tech cohort from last year where we’re taking their materials and putting them into prototypes now.”
Open innovation: ‘It’s a dating game… fun at the start’
As for the term ‘open innovation,’ it became a bit of an industry buzzword a few years ago, although “the idea that you go and find other people that have solutions to what you need is hardly novel,” Noble observes.
Noble has an open innovation team within his research and analytical sciences group that is led by Paula Hemerly in Brazil. “We also have one individual in each of our four business regions who is our focal point.”
But the challenge, he says, is creating the right environment for open innovation to work. “Finding the idea is the easy bit. Working out how you put the contract in place around that, and creating a win-win for both sides, is the hard part. It’s a dating game. It’s quite exciting at the start and a lot of fun, but we all know the hard work comes in a marriage.”
The aim, he adds, is to foster “a culture, a mindset and an openness to finding people to work with. The open innovation team is not intended to be a gatekeeper to the outside world. It’s there to provide tools, processes, approaches, to help people engage and interact in the best possible way with people across the spectrum, from the earliest ideas and the smallest startups, to the big suppliers.
“It will do proactive scouting when an R&D team will say, ‘I really need something that can do this,’ and then it will use our network of partners around the world that are best in class. ”
He adds: “Each year we also talk to all the R&D groups around the world, they tell us what they’re looking for, and we produce the top 20 technology targets and post those publicly. But you can’t just rely on that, because it’s a passive tool. You also have the active searching, active engagement and really just encourage the teams get out a bit more, go talk to people.”
