A recipe for growth10 May 2019
When a food industry giant moves into a niche market, as Kraft Heinz did with its acquisition of Primal Kitchen, it is a sign that it is planning for a future in which these market segments will grow into the mainstream. Jim Banks speaks to Primal co-founder Mark Sisson about this acquisition and examines how big companies are set up to tap into fresh and original ideas.
Healthy eating should no longer be referred to as a fad. It is a perennial subject of discussion, particularly as consumers become better equipped with facts about the nutritional value of the foods they buy. It is trend that has always been present in the market but has gained greater momentum as the general public better understands the link between food and health.
Beneath the broad banner of healthy eating, however, many different approaches to nutrition constantly emerge. Understanding and engaging with these new ways of looking at dietary habits can be a major challenge for the big global food companies, which find it hard to penetrate niche markets, and the big brands of which may, in some cases, impede them from doing so. Nevertheless, these giant companies seem to understand that they must continue to track current and future trends in nutrition, and they have tried to develop platforms through which they can do so effectively.
One recent example of a major food company investing in a growing health trend is the purchase of Primal Nutrition by Kraft Heinz. The acquisition, which closed in January for a sum in the region of $200 million, brings a global food company firmly into the market for fans of the paleo diet.
Eating a diet made up of foods that were available in the Palaeolithic era – known as the paleo diet – means focusing on nuts, seeds, lean meat and vegetables. The underlying principle is that the human body is naturally adapted to eat the kinds of food that were available to primitive people in their hunter/gatherer phase, rather than the kinds of processed foods that modern people regularly consume.
Primal Kitchen, the key brand name of Primal Nutrition, makes paleo-friendly products including mayonnaise, avocado oil and dressings that contain no processed or artificial ingredients, no added sugars, no soya and no canola oil. As such, it is undoubtedly operating in a niche market, but as the maker of the number one selling condiment – mayo made with avocado oil – and the number one selling salad dressing in the natural grocery market segment, it is predicted to generate $50 million in net sales in 2019.
The ethos behind Primal Kitchen pitches it towards a young and health-conscious demographic. It is seen as a young, vibrant and dynamic brand focused on condiments and healthy snacks that are better for the consumer, in terms of health, than traditional alternatives.
One of the co-founders, Mark Sisson, embodies the values of the brand. A former endurance athlete – he once placed fifth in the US Marathon Championship and fourth in the Hawaii Ironman competition – he founded the company in 2015, having already spent many years writing and lecturing on the benefits of high-quality fats and protein through his blog, MarksDailyApple.com. His motto is ‘eat like your life depended on it’, and it is that sentiment that led him to start marketing condiments that contain no dairy, gluten, grains or soy, and that contain beneficial fats and high-quality proteins.
“When you eat a real food diet, focused on clean protein and vegetables, it is the sauces, dressings, toppings and sides that make a meal exciting,” Sisson explains. “Before Primal Kitchen, most options on the market contained processed oils, sugar, additives and other ingredients, with mayonnaise and salad dressings being some of the biggest offenders. I started Primal Kitchen to entirely re-envision pantry staples – like mayonnaise, dressings and oils – with healthy ingredients and delicious flavour.
“Since launching my blog and my bestselling books, readership and sales have doubled every year,” he adds. “This trend has continued with the introduction of Primal Kitchen. Consumers are more educated than ever and are looking for healthy, nutritious products that don’t necessitate compromising on flavours they love. Primal Kitchen disrupted the mayo, condiment and dressing industry, not by upending or destroying it, but by highlighting the coming shift. A growing number of people care about the quality of their packaged food and are willing to pay for it. This interest is only going to grow.”
The deal sees Primal Kitchen continue as an autonomous company under its own management but enables it to leverage Kraft Heinz’s assets and infrastructure to bring its products to a wider audience and to continue developing new products consistent with its core values.
The rise in organic food sales in 2017.
Organic Trade Association
“The Primal Kitchen team has built an amazing portfolio of the world’s best-tasting, health-enhancing, real-food pantry staples,” said Paulo Basilio, US zone president for Kraft Heinz, when the deal was completed. “We are excited to partner with the company’s strong team to drive growth across multiple categories and reach more consumers looking for these amazing products.”
The amount spent by Kraft Heinz to acquire Primal Nutrition.
A springboard for success
The move to acquire Primal Kitchen showed that Kraft Heinz is diverging, to some extent, from its more familiar strategy of large-scale acquisitions. It is also in line with similar moves by some of its competitors, which have moved into the areas of healthy and ethical nutrition during the past decade.
One example is the acquisition in 2014 of Annie’s Homegrown by General Mills. Another company founded by an entrepreneur with a love of healthy – and socially conscious – nutrition, it grew from Annie Withey starting to sell her Mac & Cheese from the trunk of her car in 1989 to a business with $7 million in annual revenue before it was bought out. Working under the General Mills banner, the company has been able to extend its range of organic food – having introduced more than 50 ‘New Certified Organic’ products – and make its products available to a wider audience across the US.
What sets apart the efforts of Kraft Heinz is its creation of a specific platform for investment in the future. Primal Kitchen joined Kraft Heinz under the company’s Springboard platform, which was created to enable the food industry giant to establish partnerships with US brands that it classifies as disrupters within the industry. It is a clear strategy of looking for and embracing new food trends, and helping them grow into broader and more sustainable market niches.
Springboard’s focus is on inspired entrepreneurs and authentic business propositions within four key categories that the company believes will have a strong influence on the food and beverage space in the years ahead – natural and organic, speciality and craft, health and performance, and experiential brands.
The amount Primal Kitchen is expected to generate in net sales in 2019.
“We believe these brands are shaping the future of the food and beverage space,” says David Van Himbergen, head of Springboard at Kraft Heinz. “Our Springboard Incubator programme has been designed to be a best-in-class programme to nurture, scale, and accelerate growth of the next generation of food and beverage brands, while staying close to entrepreneurs, new ideas and consumer trends.
“Founders continue leading their businesses with support and expertise from Kraft Heinz in go-to-market capabilities, research and development and consumer insights,” he adds. “We are committed to support and partner with teams that will impact the future of our industry. In addition, we actively search for emergent, authentic brands that can expand into new categories, and look to build a network of founders to help shape the future of foods and beverages.”
What the incubator specifically provides is a collaborative work environment, as well as access to business resources including dedicated workspace, state-of-the-art pilot plants and commercial kitchens at the Kraft Heinz Innovation Centre in Glenview, Illinois. For emerging brands, the insight into worldclass management practices, global operating scale, and extensive food safety and quality capabilities can be transformative.
“One thing I didn’t realise until I got into this business – the packaged food business – is that smaller companies all eventually butt up against a ceiling,” says Sisson. “At some point, the smaller guys simply don’t have access to the same avenues of distribution as the larger guys. This isn’t negotiable. If you want to expand, you need access. From the beginning I wanted to put high-quality mayo, condiments and dressings – the ‘extra’ stuff that provides much of the added fat and sugar in the Western diet – in millions of homes. I couldn’t do that without access to those distribution channels, those industry connections and that capital. Now I can.”
“This partnership gives my team the resources needed to grow the brand’s reach and recognition, and to expand our sales with a broader distribution network,” he adds. “We’ll also have greater ability to develop and introduce new products to consumers that will help make clean and conscious eating both easy and exciting.”
A world of opportunity
To see what food trends might be seen as opportunities for growth in the near future, one can look at some of the companies that were included in the first Kraft Heinz incubator class last year. The initial group of five disruptive brands included a number of companies focused on healthy eating.
Poppilu, for instance, is a Chicago-based antioxidant lemonade brand that uses the highest-antioxidant fruits in the world – aronia berries. Quevos, which aims to help eliminate sinful snacking, makes salty and crunchy egg-white chips, which are low in carbohydrate and fat content, and high in protein.
Another brand brought into the incubator, Cleveland Kraut, is a player in the fermented foods market. Ayoba-Yo makes a nutritious alternative to traditional beef jerky and meat sticks, thanks to a 400-year-old family recipe. Kumana, best known for its signature Venezuelan-inspired Avocado Sauce, creates original sauces that represent a diverse range of flavours from around the world.
Among the key themes, therefore, are health and nutrition, world flavours and fermented foods. Other trends that could gain more ground in the near future include vegan and vegetarian foods. Although these are already well established in the market, the trend for going meatless is gaining momentum, so more alternatives to meat may well become mainstream, possibly even laboratory-grown meat grown from animal cells without the need to kill an animal.
Another established trend that is likely to gain ground is gut health. Probiotics, which have proved effective in helping people with a range of medical conditions and, for healthy consumers, increased their vitality, could well grow beyond a niche market to become staple ingredients in the diets of healthconscious consumers.
This plays into the growing awareness of what constitutes a healthy diet for people who are expecting to live longer than any previous generation. Healthy ageing is an area that urges food companies to create products that specifically look at the body’s need to ensure healthy bones, joints, brains and immune systems. Whichever trends show the most significant growth, the key factor is that big companies, like Kraft Heinz, are taking a structured approach to identifying, developing and supporting the brands that will shape the future.