Partnerships between the two are a match made in heaven, but these relationships often go awry
By Nurit Ben, first published in Nutrition Insight magazine
They say opposites attract, but that doesn’t mean the relationship is easy. Food corporates and startups are arguably as opposite as they come, yet fundamentally need each other: for innovation, growth and, more broadly, for shaping our future food systems. Corporate giants naturally bring substantial power to the table: established distribution channels, a great understanding of the market and a deep understanding of consumers. But they’re also slow. Many are publicly traded and highly risk averse. That may have worked 20 years ago, but times have changed.
Chris Thoen, chairman of the PeakBridge Scientific Advisory Board, has spent over 35 years in R&D and innovation, from Procter & Gamble to Givaudan and Bühler. “When I first joined a big corporation, there was a lot of pressure on having everything patented because product lines and products were potentially in the market for 10, 15, 20 years. The churn in the market these days is much shorter. Patents and dependability are still key, but so is being one or two steps ahead of your competition and anticipating unmet customer and consumer needs.” The food industry is also moving from one crisis to another, trying to reach profitability, all in a challenging environment. Many corporates have little bandwidth to search for innovation but have no choice if they want to succeed. The numbers tell much of that story: food companies spend just 0.4% of revenue on R&D, compared to 12% at pharma companies and 18% in the software space. The development of key technologies like data / AI and biotech is being led outside the industry, and by now, it’s food tech pulling the talent that traditional food companies will have a tough time attracting.
Sophie Blum has extensive experience with both startups and corporate giants, including leading P&G’s brandbuilding reinvention. “As a corporate, what do you need most? Innovative ideas for accelerated growth. That means giving yourself the authorization to think without constraint, which is quasi-impossible in a corporate, and for good reason.” Startups fill in those gaps: they don’t have an established business to defend and support. They can take bigger risks and challenge the approach that’s already baked into a big corporation. And in many cases, they have nothing to lose and everything to gain. On paper, food corporations and start-ups are the perfect match, filling increasingly urgent gaps on both sides. Yet the history of these relationships is littered with failed opportunities.
Facing the Failures
The same factors that make startups and corporates a perfect match are also those that eventually put a spoke in the wheel. Across the board, food corporate veterans point to mismatched timelines as a recipe for failure. Startups, accustomed to quick decision-making and action, have unrealistic expectations from corporates, who tend to have a measured, stage gate approach. The managing director of PeakBridge’s seed fund FoodSparks, Yoni Glickman has seen it up close for decades, including as president of Natural Solutions at Frutarom and EVP at IFF. “Time is the biggest, very limited resource in a startup and is almost unlimited in a corporate. This mismatch is the number one reason for failure.”
It’s not just how quickly (or not) things move but how well they’re thought out before getting out of the gate. Miriam Ueberall has helped guide R&D and innovation at some of the biggest global brands, including the Kraft Heinz Company and Unilever. Most recently she led R&D at Flora Food Group (formerly Upfield), the largest plant-based consumer goods company in the world. “We at corporates aren’t good enough at understanding the anticipated challenges early on. What are realistic timelines? What are realistic business cases? Startups can’t be expected to understand the whole supply chain when they supply a novel ingredient to a corporate. It’s our role to map out the potential manufacturing scenarios, the costs and the investments required. And once they’re clear, all these things create time delays and potential no-go decisions.”
A key part of getting that right—and a key reason for failure—is also about measuring those goals. PeakBridge CTO Dr. Gali Artzi has a deep background in scouting technologies and guiding product development, from Enzymotec to Frutarom and IFF. “Some partnerships happen based on excitement and hype alone and lack specific outcomes or metrics for success. Applying traditional corporate metrics to assess startup partnerships often fails, creating an apples-to oranges comparison.” Experience, for better or worse, can guide how to make it work best so everyone benefits. “It’s like a marriage, right?” remarks Thoen. “There aren’t that many people who see someone in the bar and immediately say, ok, tomorrow we’re gonna get married, right? There’s a courtship. You have to put in time to see if there’s a chemistry fit. You have to see how to make it work. It’s the same with corporations.”
Choose your model
Over the past three to five years many corporates have recognized that significant innovation is happening outside of the traditional food system. With startups getting more exposure, bigger companies have had to decide, do we see them as a threat or an opportunity? Many have undergone a substantial transformation to try and keep up: building venture arms, dedicating scouting teams to understanding the tech landscape and opening up to external partnerships. Some have gone the classic acquisition route, waiting until risk is low and potential reward is high to jump in. Others have tried integration, investing in Venture Capital, joint ventures and incubation programs. So which approach works best to steer innovation for the long run?
Ueberall believes it’s crucial not to put all your eggs in one basket. “I’m a true believer that technology scouting should happen in two pillars. One is moonshots: really understanding what’s out there in the long run. The other has to be much more linked to what your business requires. Finding technologies that give you something for your pipeline in the next three years or so, so you can really drive a path to market agenda.” Blum agrees that corporates should always integrate a few different pathways. “You need a palette of models corresponding to what you want to achieve in the category. Going to one model only isn’t enough and doesn’t allow you to access global brain power.”
What about acquisitions or integration? On that model, Chris Thoen is categorical: more often than not, it backfires. “We’ve seen it with Coca-Cola and Honest Tea. That was a great and growing brand when it was an independent startup. It gets acquired by The CocaCola Company and now— years later—only exists for kids as Honest Kids. The broader brand essentially disappeared. Same with P&G and the New Chapter VMS brand. They came over to P&G with the acquisition and left six years later because they said, ‘this isn’t what we signed up for.’ Big companies must be careful in how they integrate, because the reason you’re interested in a startup in the first place is because they are not corporate.”
Working together with a startup, instead of swallowing it, does require some ground rules and managing expectations on both sides. If the corporate wants too tight and too broad of exclusivity, they may be preventing real growth by restricting opportunities for the startup. On the flipside, says Thoen, “If you can have a collaboration where you say, ‘we want exclusivity in one area, but you can go and work with the broader market with other materials,’ then you make the startup stronger. You also set up a trusting relationship, where they’ll come back to you with new ideas.”
Never Neglect Culture
The truth is you can have an excellent, tested model— but if corporate culture isn’t in line, it will never lift off. Again and again, food corporate veterans come back to this point: establishing a culture of partnering and openness—while protecting what you need to protect—needs to be embedded in corporate strategy. And making it systemic takes time.
“Startups thrive on risk and experimentation, pushing boundaries to bring new ideas to the market,” says Dr. Artzi. Then they meet the risk aversion that exists in many corporate cultures, where failure is met with punitive measures.” The familiar problem is that culture tends to be woven into a company’s fabric and is one of the toughest things of all to change. Ueberall believes there’s one essential way to tackle that: top-down leadership. The senior levels of an organization have to live and breathe it, otherwise it’s just not credible. “It sounds harsh,” she says, “but you have to be honest in understanding: where do you need to replace people? Who in your organization is so intent on sticking to the past that this traditional way of working will be prevalent? And then you have to find ways to give those people a different home and bring in people from other areas, in a very conscious way. Really open up and allow a bit of disruption to come in. It’s an organizational (r)evolution.”
Lost in Translation
Imagine trying to spearhead a bold new project to pursue innovation and growth, with one team that speaks only German and the other only Spanish. It’s impossible to envision without an excellent translator, and yet it’s one of the biggest oversights in the corporate/startup relationship. Sure, they may speak the same literal language—but an enormous amount is lost in translation.
Blum led one of P&G’s most successful innovation initiatives to date, the P&G Israel House of Innovation: a then-radical idea to have a full translation body within a corporate, today recognized as one of the most successful of its global innovation hubs. She recalls the disconnect that prompted P&G to take that approach. “It came from the observation that there were fantastic opportunities in terms of startups, and a land of opportunity in terms of needs. But then it gets complicated: You bring startups and get them interacting and it’s great. The corporate picks a few and the startup says, bingo! We made it. I saw the same thing at P&G, in Puratos, and also with Google and Meta. You have the first meeting, and the corporate tells you “Great! We’re going to explore this.” The startup thinks it’s going to be tomorrow, but when you translate, it’s three to six months. And you’re already off on the wrong foot.” Avoiding this pitfall means being intentional from the get-go and having someone at the top level who speaks corporate and startup to be that internal advocate.
Startups also have a role to play in learning the corporate landscape and understanding their behavior, particularly in publicly traded companies. There are certain things you just can’t do—or can’t do quickly—because of the governance and diligence that shareholders demand. It’s also useful for start-ups to understand some of the internal politics, says Thoen.
“Often startups are blunt and say, look, this doesn’t work. And it may be something that was developed by a group of scientists who have put their blood, sweat and tears into getting that to market. There’s a positive way of doing it. If you go negative, then the antibodies within the big corporation start to increase, and your idea has no chance of being successful. The internal org is going to say: “How do we show them they’re wrong?”
Finding a Champion
Lack of internal sponsorship and strategic buy-in can be the death knell for an innovation project, and having a corporate champion is key. “We tried to go without a champion. It was a nightmare for the startup,” says Blum. And her experience isn’t unusual. A good champion bridges cultural differences, manages both sides’ expectations and has the intra-organizational connections and gravitas to constantly move things forward, whether it’s development agreements, joint ventures or other collaborations. Without one, the start-up ends up viewed as a side project. “If you don’t have that champion inside, that’s probably one of the first things you need to work on,” says Thoen. “Identify who it could be and invest time in establishing the relationship because it’s going to be a roller coaster—no matter how good the two companies are, no matter how good the technology is.”
For startups looking for that champion, Blum has some tips. “Seek out the people who are usually externally focused. You might see them a little more active than others on social networks or speaking out more than average at specialized conferences and panels. And last but not least, you simply get in touch with them and if you get an answer, you’re on the right track.”
Problems do still arise when a startup invests heavily in finding a champion, only to start from square one when he or she moves on. In public companies and major corporates people move often, and that key decision maker won’t necessarily be there the whole way through. One way to get around that is for start-ups to rethink who they approach for partnerships in the first place. For example, focusing on small to medium businesses, especially family-owned businesses where the owners are the ones calling the shots.”
So, what’s the bottom line? In 2024 and beyond, food corporates increasingly can’t afford to deprioritize innovation: it’s sink or swim. Drawing on lessons learned can save substantial time and resources and capture the best of both worlds: the firepower, knowledge and know-how of a corporate giant, with the future-defining technology of a startup. It’s of course largely about competitive edge and growth. But as Ueberall notes, it’s also about the bigger global picture; the reality of a food system that cannot sustain itself, or the people it feeds. “Why is this all so important? It’s clear. Because the challenges we face simply can’t be solved by just one party.”