FarmhouseCulture_Family_2017
General Mills' 301 Inc venture capital fund has led a $6.5 million investment in food startup Farmhouse Culture.  Courtesy of Farmhouse Culture

General Mills’ VC Arm Has Invested in a Probiotic Food Startup

Mar 08, 2017

General Mills' venture fund has made an investment in Farmhouse Culture, a maker of probiotic-rich foods and beverages.

On Wednesday, Farmhouse Culture said 301 Inc. led a $6.5 million Series D investment round. Investments in the food startup have been led by White Road Investments and Renewal Funds. Farmhouse Culture said it hasn't disclosed details of prior fundraising rounds but the startup already enjoys some fairly wide distribution. It is in over 3,000 stores nationwide with shelf space at Whole Foods (wfm) and Costco (cost).

John Haugen, vice president and general manager of General Mills' 301 Inc., said Farmhouse Culture had a "recipe for success" as it sold on-trend probiotic-rich products and has been led by a strong team with experience in the natural foods industry. "Our collective goal is for consumers across the country to have access to the full line of these products," he added. When General Mills partners with food startups, in general it can bring distribution heft and marketing expertise that can give the upstart a big boost.

The investment in Farmhouse Culture is the seventh brand that 301 Inc has placed a bet on since General Mills officially launched it in the fall of 2015 as a way to make strategic bets on innovative startups. Past investsments have included plant-based food maker Beyond Meat, kale chips maker Rhythm Superfoods, and most recently, healthy snacking startup D's Naturals. Many of the investments that General Mills has made so far have skewed toward plant-based products—Farmhouse Culture fits into that trend neatly as well.

Farmhouse Culture, unlike the other investments in 301's portfolio, also espouses the benefits of probiotics. Probiotics are live microorganisms that have purported health benefits, especially as it relates to immunity and digestive health, though not all aspects of probiotics are fully understood by experts.

"Americans are embracing the positive health benefits of probiotics and are looking for more ways to nurture healthy, good bacteria from real foods,” said Farmhouse Culture CEO John Tucker.

The startup was founded in 2008 by Kathryn Lukas, who had started selling sauerkraut at a farmers' market in California. Along with a bulked up executive team, the brand sought to expand beyond sauerkraut and now sells so-called "Gut Shots", fermented vegetables, and most recently got into the snacking business with Kraut Krisps, which are made with 50% sauerkraut. The company says it is planning to tackle additional categories later this year. That's another area where General Mills can be helpful. It often tries to extend brands into new categories—take the example of the natural foods brand Annie's, which General Mills expanded into yogurt.

While a number of Big Food players are investing in food startups via VC arms, those partnerships haven't yet resulted in a significant sales jolt. Big Food players are facing challenging sales trends as consumers tilt toward healthier food and beverage options. Startups have been winning shelf space, further pressuring the big brands owned by General Mills and its' Big Food peers. Investing in startups is a way to get a peek at those broader, new food trends—with buyouts always possible down the road if the brand looks especially promising.

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