The benefits of incubator schemes for food and beverage startups are lucrative for both entrepreneurs and the investing mentors. PepsiCo’s scheme, Nutrition Greenhouse, offers a way for food and beverage startups and investors to learn from one another while fostering growth for new businesses breaking into the food and beverage scene.
We spoke to Karen Scott, PepsiCo’s head of healthy snacking, innovation and incubation for West Europe and South Africa, to find out more about how Nutrition Greenhouse operates and what this means for future food and beverage startups.
We heard Indra Nooyi say before she stepped down that ‘healthy-for-you’ was becoming almost as large as ‘fun-for-you’. Do you see this in Europe – is your good-for-you and better-for-you portfolio going to overtake the old Pepsi mainstays?
For the last 10 years, PepsiCo has been driven by the philosophy of Performance with Purpose. A critical part of this is our ongoing target of overseeing our nutrition product sales to outpace the rest of our portfolio. In 2016-17 that’s absolutely been the case.
In Europe we have some core nutrition brands which have grown very strongly, such as Quaker, Tropicana and our gazpacho brand Alvalle. They’re becoming more experimental and more entrepreneurial.
In the last 12 months, we have launched KeVita in some key markets across Europe, and I’ve also been personally responsible for the launch of our snack brand called Off the Eaten Path and that’s been a very interesting journey for PepsiCo.
In taking a smaller, more entrepreneurial path to market, we have partnered with Sainsbury’s and launched a whole range of plant-based products, including our latest launch, which is a seaweed snack. We’re hoping that these small nutrition brands will grow in the future.
Can you give us any examples of how the first class of startups from the Nutrition Greenhouse are progressing, and the support that PepsiCo’s been able to provide them?
We’re still connected with all of the previous participants in varying degrees, and all have continued to see growth which is fantastic.
Erbology were last year’s winners, whose products are plant-based, including oils, crackers, and booster shots. This company clearly demonstrated massive potential in the programme and have grown over 400%, which is quite extraordinary in the six-month period that they were in the Greenhouse.
Since then, and with the grant that we gave them, they’ve actually moved to LA and opened an office there. They are now developing their brand and growing stateside.
There’s incredible potential for this year, and our mentees all play in various spaces, some of which may well be category disruptors – we’ve got an interesting group of products based on grains which are a highly nutritionally digestible ingredient. We’ve also got some companies which focus on dairy free, for example, Revolicious, which is a ready-to-eat smoothie bowl.
Each of them in their own way is on the way to break boundaries and create something more distinctive, and I think there could well be some trendsetters emerging in their own respective areas.
You started by saying €2m a year maximum, then €5m a year; what was it that prompted you to change the maximum size of business you were looking for?
The purpose of the Greenhouse is to work with companies who are in their very early stages of development. However, when we reviewed the cut-off point before beginning the second year programme, we felt that the limit might have been a little too low, and it had actually prevented some businesses who were still very much in their impetus to thrive.
So, we slightly raised the amount, which has not altered the fact that companies are still being introduced to the programme very early on. All of them very much have the entrepreneurial spirit.
Did you learn anything about those businesses in the first year – or about the scheme itself – that surprised you or caused you to re-evaluate any area of the Nutrition Greenhouse?
Firstly, we have broadened the assessment criteria and are now much clearer about the types of businesses we want to look into, which I think is very helpful to the companies applying.
Four key areas of interest to us are nutrition, performance, lifestyle, and a sense of purpose from the brands that are applying. These are expanded upon on our website which provides more direction to the applicants.
What surprised us from last year was the breadth of help requested by applicants. I think we expected companies to want help in areas of trade and brand marketing, but the number of people wanting help with supply chains, to break through and find more affordable, functional packaging, all of those areas and more of what was needed surprised us.
This year we’ve dramatically increased the breadth of mentors on offer to represent most of the functions such as technical elements. We have also ensured to raise the level of the seniority of mentors to help impact the future of businesses that we’re supporting.
“One of the reasons that these programmes are popular is that they are so mutually beneficial,” says Karen Scott (right).
Is it important to you that brands are offered support without the strings of an equity investment?
I think for the entrepreneurs, it’s very key at this stage to not get tied up in equity investments if they can’t afford it. The programme wasn’t set up to do that, and is not a direct goal; we set it up to accelerate these businesses and provide the experience of a more entrepreneurial environment.
The grant is valuable but what is more helpful than that is the expertise and guidance we offer these businesses in terms of acceleration, which in some cases can be quite game-changing.
The programme is a mentorship, coaching on the critical business unlocks. We will do everything in our power to help solve various challenges for these businesses, which makes it quite an interesting and dynamic programme.
Why have incubator schemes become so popular? Is it just a case of you open yourselves up to the outside world or you risk losing out?
One of the reasons that these programmes are popular is that they are so mutually beneficial.
If you’re a small start-up, you’ll have access to expertise on a very broad scale. Quite often these businesses are small teams of one or two people, so have to be a master of all trades, which can be very challenging. So, to have entrepreneurs with skills spanning multiple functions mentor you can be very helpful.
For bigger businesses, two benefits can be gained: access is given to experiment in trends without having to directly participate in them.
Secondly is more cultural, which is experiencing what it’s like to function in a smaller, more agile operation. This can be a very inspirational way to gain new business perspectives.
Does it help, also, to offset some of the traditionally less favourable aspects of being a multi-billion dollar business: the lack of agility, the relative slowness to market…
Within the company, we do have certain parts of the business which are operating differently. As part of my role I have overseen a new snack brand incubator and are doing things very differently. Off the Eaten Path was taken to market in less than nine months.
In general bigger businesses tend to operate very differently. The programme allows them to see very different ways of operating to get inspired by. I think all bigger businesses aspire to be more agile and nimble.
What’s really lovely is when you get the mentors and the smaller businesses together, you’d expect it to operate one way in respect of the more established companies mentoring the smaller businesses, but you also find out what the mentors themselves learn.
For the mentors, this is an incredible learning experience where they can access new insights that they wouldn’t normally do within their comfort zone.
And presumably, the reason the Nutrition Greenhouse has expanded to the US is that PepsiCo management has been impressed with the way it’s gone?
Certainly. Last year was a big step in Europe; we had 8 companies in the programme, who combined achieved an estimated growth of €10 million. The mentors got excited about the work they were doing internally, and Erbology opening an office in LA caught the attention of the North American team.
When you have finalists who are doing interesting things and growing very strongly, clearly it is very motivating internally. It’s been very successful, and we are in the early stages of the launch in the US.
Has there been any feedback from the head office in the US?
Our North American offices are following a very similar programme building on the learning curves last year’s experiences brought.
In mid-November, they will announce the launch line-up of their companies. So far, it’s been going very well and has had a really good entry level, and we are now looking forward to hearing who the finalists are.
We’ve seen Chobani take its accelerator programme into new directions with a new ag-tech version besides its traditional brand incubator; are there any areas PepsiCo is interested in relation to the Nutrition Greenhouse? And where can we expect it to go from here?
It’s still very early days for us. We have made quite a lot of changes this year, and we expect to make even more changes to optimise what we’ve learned into next year.
There are absolutely lots of areas where this model could work in the future, but we are not in a desperate rush to expand this too quickly.
© FoodBev Media Ltd 2019