By: Bernard T. Bartilad, Senior Vice President—Market Executive & Dan Short, Vice President, Relationship Manager
Food is not just necessary for life; it’s big business. And like any business, food companies must constantly innovate to meet the demands of their market. Today’s consumers are looking for fresh, healthy food they can conveniently access, at prices they can afford.
Developing new ways to produce and deliver their products can be challenging for large, traditional food companies with years of success and potential layers of bureaucracy. That’s why startups, with their energetic leaders and lean, nimble operations, are often better able to develop innovative products and procedures. And business incubators have become hotbeds for innovation in the food industry.
Middle market companies can get in on the innovation offered by incubators too. Some of the opportunities to capitalize on the food incubator innovation trend include investing in incubators, developing their own in-house incubators, and even sourcing from incubator-grown vendors.
The Hatchery, a Chicago food incubator, opened in December 2018 and has created more than 150 jobs this year. Located in East Garfield Park, one of Chicago’s most underserved neighborhoods, The Hatchery is slated to create more than 900 jobs in its first five years.
But it’s not just helping to revitalize its neighborhood: The $34 million project serves as a training ground for young entrepreneurs who dream of opening a new restaurant or packaging a particular food product for distribution. It provides a place where they can receive training on how to run their business, refine their culinary techniques in laboratory kitchens or improve their marketing savvy.
Innovation Must Move Quickly
Food trends change fast. Consumers can quickly switch from a focus on gourmet cupcakes to demanding avocado toast, and then on to the next thing. To be successful, food businesses must regularly evolve—and they can more easily innovate and capitalize on trends and consumer demands when they aren’t operating in a vacuum.
Incubators can provide food entrepreneurs with connections to vendors, potential partners and others who can help them quickly respond to needs. For example, global ingredient developer Ingredion partners with The Hatchery to help emerging food companies develop the right taste and properties, such as gluten-free or dairy-free, for their new food products. By being part of the incubator, startups get access to expert suppliers like this, allowing them to keep up with trends and meet market demands.
Larger companies can leverage incubators to drive innovation, too. The yogurt company Chobani launched its own incubator to help build and grow innovative, early-stage food and beverage startups. For each company accepted in the Chobani Incubator, Chobani provides a $25,000 grant, as well as education, mentoring and access to a network of experts, founders, retailers and investors. Through participating in the Chobani Incubator, Chloe’s Fruit connected with coffee company La Colombe. Through that partnership, the company developed a cold brew popsicle.
Driving Innovation in All Areas
Food incubators don’t just help companies develop new food products. They are helping drive innovation in all areas of the food business, including production, packaging, staffing and marketing.
Celebrity chef Rick Bayless, one of the first tenants at The Hatchery, will run a workforce training program for high school and college students. Through this unique program, young people with an interest in the food industry can access valuable education—and incubator companies, as well as other local food companies, will gain access to a new pipeline of talent.
Rumi Spice, a saffron-sourcing company, was another participant in the Chobani Incubator program. As a result, the company grew significantly, expanding its workforce to 1,900 women in Afghanistan.
Food Giants Getting Involved
Large corporations are not known for their ability to innovate, but many large food companies are taking notice of the value of startup culture. As a result, more big corporations are also playing important roles in food incubators.
Kellogg Company and Con Agra Brands, along with three nonprofits, helped fund and create The Hatchery. Such investments allow the companies to give back to communities and to the future of the food industry. For their investors, incubators can also offer access to the innovation and culture of the entrepreneurial companies that join it.
In addition to Chobani, other large food companies like Kraft Heinz have launched their own in-house incubator programs for food startups to develop and grow. Each in-house program has its own unique structure and goals, but they all focus on innovating, serving, and investing in the future.
Innovation, Large and Small
As unique collaborations between small startups and large corporations, incubators can breed innovative practices and techniques at all stages of business.
First, incubators boost innovation in new food companies by providing entrepreneurs with the tools to develop their ideas and grow their market share. As a participant in Kraft Heinz’s Springboard incubator program, which included access to a fully-equipped innovation lab, Cleveland Kraut switched its packaging from glass jars to snackable plastic pouches.
Incubators also boost innovation in traditional food companies. When large food corporations sponsor or work with incubator companies, they’re able to capitalize on the energy and learn from the innovation of new startups.
For example, by learning from entrepreneurs in its Springboard incubator program, Kraft Heinz is applying innovative practices and startup culture to its legacy brands like Jell-O and Boca.
The food industry, like most other industries, is ripe for innovative new products and practices. Entrepreneurs and startups often have the energy, ideas and agility to bring that innovation to market.