One of the biggest promoters of functional foods is putting its money
where its mouth is.
Nestlé U.S.A. Inc. has established a $150 million US venture capital
fund that will invest in science and technology companies in the life
sciences field.
It was launched in March 2002 and will fund high-risk companies working
on genomics, product development and processing technology to do with
food and nutrition.
The company will review applications from around the world, said Steve
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Allen, vice-president of new business development with Nestlé U.S.A.
Worldwide sales for Nestlé amount to $50 billion annually, making it
the number one food company on the planet.
Allen said functional foods such as sports drinks, energy bars and
enriched cereals represent around $1 billion in annual sales for the
company, but that segment of its business is exploding.
“Our base business grows at only one or two percent a year in most
parts of the world, whereas we know that functional foods, though small
at the moment, are growing at double digit numbers.”
Allen gave the new venture capital fund a brief plug during his speech
to the 110 delegates who attended the Saskatchewan Nutraceutical
Network’s fifth annual general meeting.
He later told reporters that he agreed to make the trip from Glendale,
California to Saskatoon because Saskatchewan is rife with opportunities
in the functional foods area.
“That’s the reason I’m here. It’s a long trip but I think it’s worth
it.”
Allen praised the provincial and federal governments for their
financial support of the industry and said there is opportunity to
develop functional foods in Saskatchewan because of the province’s land
base combined with its growing research sector.
“I think this province has a really bright future in this area.”
Ag-West Biotech Inc. president Peter McCann said news of another
venture capital fund that will invest in the functional foods industry
is a good thing.
“Obviously it would be of great interest to talk to Nestlé,” he said.
Ag-West supports and promotes Saskatchewan’s agriculture biotechnology,
nutraceutical and functional foods industries.
Each year the agency invests about $100,000 in three projects in the
life sciences field that show some promise.
“They have the potential, some of them, to be blockbuster products,”
said McCann.
In addition to investing a small amount of money in firms like
Bioriginal Food and Science Corp. and Fytokem Products Inc., Ag-West
takes the start-up company under its wing, providing management advice
and access to other sources of funding such as government agencies and
venture
capital.
McCann said high risk companies that are able to catch the eye of a
venture capital manager can go from $100,000 in funding to millions of
dollars in the bank in the blink of an eye, but it often comes with
strings attached.
Multinationals find it cheaper to buy research than to do it
themselves. That’s why they approach small start-up companies.
“They’ll slowly dangle $5 million bucks in front of them. People think
they’ve died and gone to heaven. They’ll sell out and the technology
gets whipped off to Switzerland, or Research Triangle Park, or England.”
What’s really important for the small companies is to build up some
equity of their own before seeking out venture capital investment, said
McCann.
At least then when the company sells out more money stays in the
province. And if there is enough built-in value, control of the company
will also stay put.
