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  1. Interviews
October 18, 2018

Katjesgreenfood CEO Manon Littek on the “food revolution” and why the German confectioner has formed division to back upstarts – interview

Katjes Group is a member of Big Food with a division to invest in fledgling businesses. Dean Best talks to the Germany-based confectioner about the strategy for its Katjesgreenfood fund.

Katjes Group is a member of Big Food with a division to invest in fledgling businesses. Dean Best talks to the Germany-based confectioner about the strategy for its Katjesgreenfood fund.

Big Food’s moves to set up in-house divisions through which to invest in (or buy outright) smaller brands have predominantly been in the US

Not exclusively, though. Germany-based confectionery giant Katjes Group is one of a smaller number of European-based food manufacturers to have formed a unit looking to back fledgling food makers operating in faster-growing, on-trend categories.

Katjes established Katjesgreenfood – which, as its name suggests, largely puts money into up-and-coming businesses with an eye on sustainability – in 2016. At the time of writing, the Katjesgreenfood fund, backed by money from the family that set up and has owned Katjes Group since the 1950s, has made seven investments, the latest signed this summer with a stake in Fora, a US supplier of vegan butter.

Manon Littek, an executive who has worked at German media group Hubert Burda Media, is the CEO of the Berlin-based Katjesgreenfood. She says Katjes Group’s commitment to sustainability and track-record in building brands were central to its decision to form the fund, making it the “third pillar” of the group, alongside the domestically-centred confectioner Katjes Fassin and the more internationally-focused Katjes International (which is home to brands like Lutti and Sperlari).

“Of course, for a family company, sustainability – and the concept of bringing the company into the next generation – is very important,” Littek says. “Katjes Fassin was also very revolutionary, before the whole plant-based trend came about, to change the jelly [in the company’s sweets], which is usually made out of animal bone, and make it completely vegetarian. 

“Katjes is a very strong and loved brand and one of the expertise [areas] of the company is to make brands flourish. The M&A strategy of Katjes International is to buy old, nostalgic brands that are not any longer flourishing and to help them flourish again.”

Was the mature, low-growth state of the confectionery market in western Europe also a factor in the setting up of Katjesgreenfood? The search for growth has been central to the moves by Big Food to launch in-house funds to back upstart businesses.

“Of course, they see the food revolution is taking place and the food market is transforming,” Littek tells just-food. “They have been always quite early when it comes to new developments and trends, like making the core Katjes company vegetarian and building the first 3D business in food, which started three years ago. They are very good at sensing new developments. They still very much believe in the sweets industry.”

As well as Fora, Katjesgreenfood’s investments include stakes in German vegan retailer Veganz, Haferkater, a German porridge business, US muesli manufacturer Seven Sundays and Foodstirs Modern Baking, a US organic baking start-up co-founded by actor Sarah Michelle Gellar.

Littek outlines three criteria Katjesgreenfood weighs up before backing a business – including one she believes non-food investors the sector do not always consider.

“We look very much into the innovation element and what kind of USPs the new product has. Is it disrupting an old category or is it building a new one? Does it have a chance to be – or is it already category leader – in this new category? It can be interpreted in different ways. Foodstirs’ product is not super-innovative but, when you look at that market, no-one has disrupted the baking industry in the US.

“For others, for example with Fora, it’s a completely new product. Then we look and say ‘OK is there a patent behind it? Do they have exclusivity with the suppliers? How do they structure the supply chain? Is the USP and innovation advantage defend-able?’

“The second point for us is branding because we think it’s extremely important in scaling the business. Third is something extremely important for food but interestingly a lot of investors coming from tech into this scene don’t really look for it – exceptional quality and taste. If the concept is great, the market is large and growth is great, fine – but if it doesn’t taste excellent and the quality is not excellent, we do not invest.”

The mention of tech investors eyeing up the food sector emphasises the competition for assets. Hardly a week has gone by in recent quarters without an announcement of a fledgling company – particularly in North America but also in western Europe – receiving backing of some kind. Of course, not every nascent firm will succeed and not every investment pay off, meaning there is (or should be) scrutiny of assets and some sharp elbows competing for them.

Reflecting on the investment on Fora, Littek argues Katjesgreenfood can help the FabaButter owner “internationalise and bring a new, European perspective to the table”. But is Katjesgreenfood having to work harder to be chosen as an investor?

“In the US market, it gets more and more crowded as people try to enter that space [but] we haven’t seen many of the larger corporates in competition with the companies we’ve been interested. We’ve seen more new VCs focusing on the food space like Cambridge Partners that are in the same area as us,” Littek says.

With Katjes Group a family-owned business, Littek says the company would not disclose how much money it is prepared to put to one side for Katjesgreenfood but she reveals the fund is “usually” looking to “do around four investments per year”.

So far, Katjesgreenfood has acquired stakes of between 5% and 25% in the seven companies it has backed, which also include Caté, a coffee and cherries-based drinks company and Hemptastic, a hemp lemonade producer.

“For most of the companies, it’s probable that there will be an exit because we just have a minority share but we are open to staying long term in companies,” Littek says. “And of course if something very interesting develops for us and there’s a chance, it could also happen we take the majority or take a company.”

So far, North America – and particularly the US – has been where most of the venture-capital action has been, from the in-house funds of food manufacturers mimicking the funds or otherwise.

“The US market is much further ahead,” Littek says. “The US consumer is more ready in terms of trends; in California, they’re really used to these topics and the mindset is further [advanced]. There is also a different relationship with food. In the US, it’s really more functional and about optimising yourself. In Europe, when you look at Germany and especially France and Italy, there is a cultural heritage and a different relationship. I think in the UK it’s in between. In Germany, the food revolution has just started. You have some hubs. You have Berlin as the vegan capital of Europe.”

Littek, however, believes Europe will catch up and companies will react. She points out that some – like Katjes Group – have reacted by forming investment arms, while others have set up incubator programmes, an initiative the company decided against pursuing.

“We saw there’s a food revolution taking place, the market is ready and, from the beginning, Katjes wanted to build a serious third pillar for the group and invest. With incubation, often it’s something you do a little bit half-hearted. You know you have to do something but you don’t dare to invest yet and you do a little bit of trial and error. I know a lot of companies at the end actually lose money because they don’t really do something with it.”

Looking ahead, Littek suggests sustainability will continue to be the prism through which Katjesgreenfood makes its investments. She does, however, hint at other areas of interest.

“The whole topic of sustainability is huge. You have seen it in some of our investments already. Plant-based, sustainable protein will go further. You have the whole topic of food waste we are observing already. And I think also what is becoming quite important is the packaging topic. We have the whole plastic debate,” Littek reflects.

“You have the topic on an individual level of food getting more and more personal to your liking. You have the fermentation topic. And some of the companies we have invested in that try to look at old, big categories that don’t yet have an organic, clean-label product disrupting them. The next generation doesn’t have any trust in the old brands. I think we will see a lot of the traditional categories get disrupted by new brands.”

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