The past decade or so has seen a boom in small food companies with a natural or healthy slant taking market share away from the big guys (especially in the past few years as consumer trust in the famous names erodes), which most people can agree is a good thing. But all is not as it seems: Many of those seemingly small companies are owned by some of the largest food corporations on earth.
Starting a food company isn’t easy. Let’s say that you spend years perfecting a granola recipe and are ready to take it to the masses — you can’t just whip up a couple big batches, bag it up, and get it on the shelves of your local supermarket. You need to secure licenses and permits, design and order packaging, work out the supply chain, hire employees, advertise, find a production kitchen, secure distribution, manage the books… the list goes on and on. And all this just for what will almost certainly be a tiny operation, at least at first.
But let’s say that the product sells well and starts to earn a reputation and you can barely keep up with demand. You’re ready to graduate to the big leagues. Where do you go? A trade show. Food giants are constantly looking for new products to take under their wings, and small food companies with a proven track record are ideal. In fact, the big boys don't necessarily develop their own products anymore; when Hershey’s launched their Lancaster caramels last year, it was their first new company-developed candy brand in 30 years!
It’s nice to see independent food companies doing their own thing — but being bought out by one of the big guys isn’t necessarily as bad is it might sound. When, let’s say, General Mills comes in and buys your product, they’re now handling supply chain, production, marketing, distribution, and all the rest of the heavy lifting, leaving you with a nice chunk of change and (you hope) the opportunity to stay on board as an executive and still play a major role in the day-to-day operation of the company. The buyer, meanwhile, adds instant credibility to its portfolio, along with a company that has had success in the healthy food marketplace. It's like a tech startup being bought by Google: the big company gets something fresh and innovative, the small one get big bucks and reach — at least theoretically a win-win for everyone involved.
Kashi, founded in 1984 in La Jolla, California, focuses on breakfast cereals and other products with lots of whole grains. In 2000, Kellogg’s bought the company for $33 million, but allowed Kashi to continue to operate independently until March 2013, when Kashi headquarters were moved to Kellogg's corporate home in Battle Creek, Michigan. A year later, Kellogg's lost a class-action lawsuit and had to remove the term "All Natural" from its labels.
Krave Jerky: Hershey
Krave Jerky was founded by marathon runner Jon Sebastiani, of Sonoma's famed Sebastiani wine family, in 2009. The company, which produces artisanal jerky made with whole muscle in flavors like chili lime and cabernet rosemary, was purchased by Hershey earlier this year for somewhere in the $200 million to $300 million range. It represents the company’s first foray into the $2.5-billion meat-snack market.