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Thought Leadership for Healthy Food & Beverage Brands​

Understanding How External Investments Drive Your Better-for-You F&B CPG Brand’s Growth

By Victoria Walling

Startups in the better-for-you F&B CPG industry begin with brilliant business ideas with the aim of getting operations up and running as soon as possible. Each company works to prove their worth and value through their products and services, and some are able to steadily grow through the generosity of friends and families, as well as the capability of the founders’ own financial resources. However, once customer base grows and the business starts to scale its operations, additional backing and funding will help push forward plans for success.

While there is a small number of companies able to grow on their own with little or no external help needed, there is also a large majority of successful startups within the better-for-you F&B CPG industry that have pursued various strategies to secure funding through rounds of external investments.

But what does it really mean for some of the successful brands within the better-for-you F&B CPG industry when they decided to raise and secure funds to spur the growth of their businesses and product lines? Let’s delve into this more with a few examples.

Making the Impossible, Possible

Many of us know Impossible Foods as one of the bigger players in the plant-based meat alternative space that has received significant investment funding in the past years. In fact, from 2018 to 2021, the company successfully raised a total of over USD 2 billion from investors like Temasek Holdings, Mirae Asset Global Investments, and Khosla Ventures.

This was closed by its Series H round back in October 2021 that brought in an additional USD 500M into the company’s funding that has been used to invest in research, beef up company’s manufacturing efforts, further scale their retail presence nationwide and in specific international markets, and efforts into creating more noise around its meatless burgers, nuggets, and sausages.

But how are they able to succeed in raising funds?

  • Innovation and High Demand Products – The company produces plant-based meat alternatives that are innovative, high quality, and in demand among consumers who are looking for healthier and more sustainable food choices. This has helped attract investors who see the potential for growth and market dominance.

  • Strategic Partnership – The company has been able to form successful partnership with major foodservice and retail companies like Burger King, Kroger, and Starbucks that have helped them drive brand awareness, affiliation, and increase distribution channels.

  • Environmental and Social Impact – Their products not only are healthy but have a positive impact on the environment as they reduce greenhouse gas emissions and land use. This has been received well by investors looking for socially responsible investments.

  • Strong Management Team – While there have been significant changes in executive roles in recent years, the company has a strong management team with deep expertise in the food industry and a track record for success in launching new products and scaling businesses.

Turning Oat Milk into a Household Staple

Oatly has become somewhat of a household name in many countries across Europe, in the US, and in China. Since its launch in 1994, the brand has grown its product line, reach and distribution over time. The company has undergone over four investment rounds and in 2020, they were able to raise USD 241.4 million from a private equity round with investors such as Blackstone, Oprah Winfrey, and Jay-Z's Roc Nation. In 2021, the company went public and filed for IPO and was able to raise a total of USD 1.4 billion.

They have used these funds to expand the capacity for production, invest in research and development of new products, as well as increase marketing efforts. Over the recent years, oat milk has made it big in their marketing efforts with unconventional approaches that have captured the attention of their audiences, making their brand name an easy one to remember.

However, despite the IPO, Oatly’s shares in 2022 dipped 80% leaving the company’s equity to $950 million from its $10 billion worth when it went public in 2021. Their CEO Toni Petersson shared last year that the restrictions in utilizing their production facilities in Asia, their production issues in the Americas, and the foreign exchange pressures have largely affected the performance of their earnings. The company plans to save on costs by cutting 25% of jobs in their Europe, Middle East, and Africa divisions.

Can this powerhouse, alt milk brand that has been making waves in the better-for-you F&B CPG industry bring back its glory and claim its leadership position again? We can only assume and hope for that.

Perfecting the Secret to Animal-Free Dairy

When you think of animal-free dairy products, one of the biggest players now that has made great innovations in the market today would be Perfect Day. They have gone through seven funding rounds and raising over USD 750 million. They have leveraged crowdfunding platforms like Kickstarter and Indiegogo to raise money for the innovative dairy production technology; as well as received funding from investors and venture capitalists who see the potential of their technology to disrupt the dairy industry.

What’s great about Perfect Day’s model is that they have formed strategic partnerships with food and beverage companies interested in using their animal-free dairy protein in their products. Because of this, they are able to further scale their production capabilities.

However, while Perfect Day has been successful in raising funds, there have been some challenges along the way in securing funding. They faced early skepticism from investors on the feasibility of producing dairy without animals. They also had high cost of research and development for their technology, which required significant investments for lab equipment, research personnel, and production facilities. Despite these challenges, Perfect Day has persevered and continued to make significant strides in animal-free dairy production.

Raising and seeking additional investments can give any business a boost from gaining capital for growth to bringing in expertise and building credibility. However, as with anything else, it can come with some disadvantages.

There are cases when bringing in investors means you give up some control over your business. Some require a seat on your board or want to have a say in major business decisions. You also have more pressure to perform as these investors look for a return on their investment. Bringing in external investors can mean diluting your ownership stake in your company.

Entrepreneurs need to understand all the pros and cons of seeking external investments, and how you can turn an investment into the push that your company needs to grow and thrive even better. Overall, it is important to carefully consider the potential drawbacks and ensure that the investments align with your long-term goals for the company.

Have you considered taking in external investments to scale your business?

2022 The Vineyard. All Rights Reserved.​

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