By Lynda Kiernan
C7 Ventures, the venture capital arm of the iconic 125 year-old candy giant Hershey, has made undisclosed investments in two emerging snack startups in exchange for minority stakes in the businesses.
C7 was established as a vehicle to make smaller-sized investments in disruptive or emerging platforms focused on new occasions, new technologies, and new go-to-market opportunities. And as it begins to build its portfolio, the fund has chosen for its first two targets New York-based Blue Stripes Cacao Shop and Ireland-based protein bar startup FULFIL.
Founded by Oded Brenner, an innovator, cacao entrepreneur, and creator of New York restaurant Max Brenner, Blue Stripes Cacao Shop offers consumers an experiential retail environment that integrates cocoa with a unique shopping experience inspired by Brener’s exposure to “Jamaican Breakfast Cacao” and Cacao Fruit pulp, which led him to explore new cacao-based preparations and products. The shop will include a kitchen lab for the development of new cacao-based products that can be tested by customers, and will also source sustainable chocolate and cacao for the production of on-demand items for customers.
“Successful companies evolve and engage consumers in new and different ways,” said Mary Beth West, chief growth officer, Hershey. “As we continue to expand our snacking portfolio, our innovation agenda takes a balanced approach across investing in core brands and experimenting with new business models. This includes creating new platforms through R&D, strategic acquisitions, and investments in businesses that are sitting at the cross section of new consumer snacking needs.”
Headquartered in Dublin, Ireland, FULFIL produces vitamin-fortified, high-protein chocolate snack bars in the UK and Ireland. Coming in a range of popular flavors including chocolate orange, white chocolate, cookie dough, and chocolate hazelnut whip, each of FULFIL’s bars contain less than three grams of sugar. Through its partnership with the startup, C7 and Hershey foresee the creation of opportunities in new occasions among new consumer segments and markets.
Snack Down
Over the past years snacking has demonstrated continued growth as a consumer trend. However, this growth has recently accelerated, with 76 percent of consumers snacking in 2014 increasing to 83 percent of consumers in 2016, according to Technomic. Indeed, as more consumers look to adopt a ‘balanced diet’, snacking is shedding its perceived bad reputation with the number of consumers eating five or more snacks per day rising 2.7 percent year-on-year – from 11.5 percent in 2016 to 14.2 percent in 2017, according to the report, 2017 State of the Snack Food Industry published by IRI.
Meanwhile, consumption of chocolate-centric foods declined in volume by 5,000 metric tons between 2010 and 2015, and is predicted to fall by another 1 percent between 2016 and 2021, according to Euromonitor, reports the Motley Fool.
With this writing on the wall, Hershey has made a concerted effort to diversify its candy and chocolate business into the rapidly growing snack category. This strategy materialized in a bold move in December 2017 when the company acquired Amplify Snack Brands Inc. for $1.6 billion.
The all-cash deal was indicative of the strategic plan of consolidation in the face of dwindling returns and a need to expand beyond chocolate for new Hershey CEO Michele Buck following Hershey’s rejection of a $23 billion takeover by Mondelez the previous year.
This drive was echoed by company CFO Patricia Little at the time, who said, “Nothing is as profitable as our core products… But we need to expand our portfolio,” reported CNBC.
The addition of Amplify to Hershey’s portfolio of approximately 80 brands names was expected to produce an annual run-rate of synergies totaling about $20 million between 2017 and 2019.
“The acquisition of Amplify and its product portfolio is an important step in our journey to becoming an innovative snacking powerhouse as together it will enable us to bring scale and category management capabilities to a key sub-segment of the warehouse snack aisle,” said Buck. “Hershey’s snack mix and meat snacks products, combined with Amplify’s Skinny Pop, Tyrrells, Oatmega, Paqui and other international brands, will allow us to capture more consumer snacking occasions by creating a broader portfolio of brands.”
One year after this significant deal, Hershey made another big bet on the better-for-you snack category and acquired Pirate Brands, maker of Pirate’s Booty, Smart Puffs, and Original Tings, for $420 million.
Together, these two deals would form the foundation of a significant presence for Hershey in a new category.
“We expect the full Pirate Brands portfolio to be a great fit for Hershey’s growing Amplify business which is targeted toward consumers who are looking for great-tasting snacks without compromise,” said West last year.
– Lynda Kiernan is Editor with GAI Media and daily contributor to GAI News. If you would like to submit a contribution for consideration, please contact Ms. Kiernan at lkiernan@globalaginvesting.com
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