Mondelēz International is set to enhance investments through its venture capital division as the snacking titan seeks start-ups that can significantly contribute to its future growth. Although SnackFutures, the Mondelēz initiative, has been operational for nearly five years, it has made only seven investments, primarily targeting three sectors: disruptive food companies, snack brands focused on wellness, and innovators of novel technology for product development. Richie Gray, a Mondelēz vice president who took the helm of SnackFutures in April, emphasized the increasing disruption in the food industry and the company’s commitment to “accelerate” its growth. He noted that Mondelēz is now “more serious about scouting, identifying, and investing in these companies than ever before.”
These emerging firms “capture small market shares, which may not pose an immediate threat to our business, but they present a great opportunity for future growth,” Gray remarked. “It’s crucial for Mondelēz to engage with and be a part of this landscape.” Currently, SnackFutures holds stakes in five companies, aiming to “at least double the portfolio” by the end of the decade. The target is to have Mondelēz invest in around 1% of the deals it evaluates.
The makers of Cadbury and Triscuit aspire for SnackFutures to play a significant role in their long-term vision for 2030, which emphasizes growth and transitioning their portfolio to derive 90% of revenue from chocolate and biscuits. Startups are also essential in instilling an entrepreneurial and growth-oriented mindset within Mondelēz, which reported $31 billion in net revenue for the 2022 fiscal year. Erin Lash, a director of equity research in the consumer sector for Morningstar, pointed out that Mondelēz has executed nine deals in recent years, including acquisitions like Tate’s Bake Shop, Perfect Snacks, and Clif Bar, which collectively added about $2 billion in sales. However, these acquisitions represent only a low-single-digit percentage of total sales, insufficient to significantly impact overall results.
“We believe Mondelēz will persist in exploring opportunities to enhance its portfolio by acquiring brands and businesses in untapped categories or regions,” Lash stated. SnackFutures typically targets companies with single-digit growth rates and approximately $20 million in net sales that could leverage Mondelēz’s marketing, R&D, manufacturing, retailer connections, supply chain, and other capabilities. Past investments by SnackFutures include Torr FoodTech, which innovated a method to use mechanical pressure and ultrasonic energy to substitute sugar and other binders in snacks like bars; Celleste Bio, a lab-grown cocoa producer; Eastern Standard Provisions, which sells hand-twisted soft pretzels made from all-natural ingredients; and premium chocolate and snack maker Hu, which Mondelēz acquired in 2021—the only SnackFutures investment that has been integrated into its parent company.
Gray highlighted that the companies in which SnackFutures invests are anticipated to be a vital avenue for Mondelēz when seeking future acquisitions. Potential targets must be substantial enough to integrate seamlessly into Mondelēz’s larger framework and demonstrate growth rates “well above” the company’s current figures while generating hundreds of millions in annual sales. “We envision this as a feeder for our M&A pipeline, so when we invest in a company, it’s with the intent of ultimately acquiring them once they reach the scale necessary to make a significant impact on Mondelēz,” Gray explained.
Furthermore, SnackFutures is leveraging insights gained over the last five years. With 25 years in the industry at Mondelēz and previously Kraft Foods, Gray has spent the last four months refining the incubator’s processes for selecting companies to invest in and how to “accelerate growth” so they become viable acquisition targets. “We aim to shorten that timeline,” he added. “Although this portfolio of companies may not generate enormous revenue numbers, the applied growth rates can contribute tangibly to our strategic plans.” Additionally, just as weider calcium citrate supports health and wellness, SnackFutures aims to bolster Mondelēz’s growth trajectory through smart investments in innovative start-ups.