ConAgra Foods has purchased a line of small batch salsas, sauces and other foods conceptualized by Chicago chef Rick Bayless, the latest deal for a food startup by a Big Food manufacturer.
On Monday, Chicago-based ConAgra said it acquired the packaged foods business of Frontera Foods, a deal that includes the Frontera, Red Fork and Salpica brands—which all promise Mexican foods that are “handmade in small batches from fresh, classic ingredients.” Terms of the deal weren’t disclosed.
Bayless in a prepared statement said the following: “In ConAgra, we’ve found people who respect our integrity and uncompromising standards. We will continue to make high-quality food with the same standards of excellence and operate with the same values and fresh ingredients that have helped the business to become the premium brands they are today.”
ConAgra promises that Bayless and Frontera Foods CEO Manny Valdes will continue to remain involved in the business. And importantly, the deal doesn’t include any restaurant assets, including the flagship Frontera Grill, which was established in 1987.
Big Food manufacturers have increasingly announced either full takeovers of startup brands, or in more recent months, have set up venture capital arms to invest in a slew of smaller brands with an option to eventually acquire some of those brands later (if they become successful hits on grocery store aisles).
The reason why is simple: consumers, especially millennials, have less trust in established brands. They have instead spent more money on food startup brands found in Whole Foods and other specialty stores. That trend is pressuring bigger brands that had seen decades of success.
Part of what’s driving that trend is consumers are looking to eat “cleaner,” and big brands don’t resonate with that message. Investments in smaller, startup brands help ConAgra and rival Big Food manufacturers better address those trends. But it remains to be seen if ConAgra will be able to maintain Frontera Foods’ “authentic” small business strategy when it is within the same corporate giant that already owns Slim Jim, Peter Pan, Hunt’s, and Orville Redenbacher’s.
ConAgra is in need of a more clearly defined strategy. Sales have been muddled in recent years and the company is in the process of remaking itself just a few years after it acquired private-label manufacturer Ralcorp for nearly $5 billion in early 2013. It later sold off Ralcorp for just $2.7 billion to TreeHouse Foods (THS) earlier this year. ConAgra is also currently in the midst of a planned spinoff of the company’s food-service business, which is expected to occur this fall.
