Investment chief Grant Ferrier, told NutraIngredients an ‘entrepreneurial culture’ in selected pockets in Europe is mimicking Silicon Valley – helping drive forward the nutrition industry.
Nutrition Capital Network (NCN) reported a record number of investments across the nutrition, health and wellness industry in 2016, with Ferrier commenting that the entrepreneurial culture is being partly fuelled by external funding and like-minded food and nutrition entrepreneurs working in the same communities.
“We see more companies aspiring to the stereotypical Silicon Valley entrepreneurs in tennis shoes or in his garage making new products and becoming millionaires. We see those aspirations among the new generation of nutrition industry aspirants,” he told us.
Examples of institutional support and communities evolving around entrepreneurs include Berlin, parts of France, Scandinavia and the UK, said Ferrier.
Record activity
Ferrier’s comments come as NCN reports a record number of 707 M&A and financing deals in 2016 across nutrition, health and wellness; the highest since 2013 when comparative data is available.
Of the 707 deals, 456 were through investments and 251 through M&A deals.
The data reveals there was a total of 102 deals in natural, organic, functional food, the highest since 2013, and 15 in supplements, up from the 10 in 2015, but less than the 22 deals in 2014.
M&A activity in the supplements sector include supplement company Nutraceutical Corp acquiring skin and beauty product maker Aubrey Organics last year.
However, Ferrier said that big food companies were unlikely to be making investments in supplement companies, as alternative sectors are more appealing to them.
He said: “The big players in the food industry are not likely to make investment or acquisitions in dietary supplements at least in the more traditional pill categories and ingredient focused marketing companies.
“There is stronger interest in protein sport nutrition lifestyle products and alternative delivery mechanisms besides food for concentrated nutrients.”
More broadly, NCN noted that while investment in branded food & beverages kept a face pace in 2016, the average level of investment shrunk to $7.2m (€6.75m).
The fall was partly due to the finite number of investment targets and partly due to companies placing bets on companies at an earlier stage, sometimes through setting up their own venture capital arms.
Tyson Foods, Kellogg, Campbell Soup, Hain-Celestial are amongst those companies with venture capital arms.
Despite the shrinking in investment levels, there some big deals in 2016 including Dr Pepper’s $1.7bn (€1.59bn) purchase of Bai Brands and Danone spending $12.5bn (€11.7bn) to buy WhiteWave Foods, one of a number of investments in plant-based alternatives and protein sector.
Other examples include General Mills’ venture arm 301 investing $18m (€16.8m) in the nut-based milk, cheese and yoghurt company Kite Hill.
Contrasting the US and European functional foods market, Ferrier said historically there was more innovation in the US, which could be attributed to the “uniformity of the large market allowing more opportunity for entrepreneurs to launch and to reach scale with less obstacles than in Europe.”