The Big Business of Food

by Adam on February 3, 2013

In looking at the evolution of the food space, especially as it relates to the technology space, there’s a lot that can be gained by finding analogies to similar business ecosystems that have come before. These analogies help to explain and map the opportunity for smaller companies against well-entrenched incumbents who seem to have a lock on the market.

A friend of mine recently related a bit of symmetry she had witnessed in the enterprise software space many years ago, where there were big companies like Cisco whose hold on the market seemed almost impenetrable. There is a great parallel to what happened in that space and what’s happening/will happen in the food space. Cisco and others are clearly still part of the ecosystem, but smaller companies have come on the scene and thrived. So too will small food product makers, food + tech entrepreneurs and others in this space find a path to market that allows them to carve a niche and be successful.

What’s perhaps most interesting about all of this is that rather than fight it, many food companies (especially in the CPG space) are embracing the opportunity to work with food start-ups. Unilever and PepsiCo both have venture arms that are actively involved in investing in food. General Mills Ventures has a robust M&A department (and I sat on a panel with the head of that department recently and was fascinated to hear how they are using the venture fund as an incubator for potential acquires).

This activity on the part of CPG companies of course doesn’t come without potential downsides, especially since the new entrepreneurship environment dictates that founders need to think forward to exits as soon as a company starts to gain traction. This allows for some of the bigger players in the marketplace to play an active role in M&A, but I do wonder if/how it stifles healthy competition in the marketplace in the long-run. In the enterprise software space, the answer would likely be that it hasn’t, so it’s possible that the same will be true for food.

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