Kellogg Starts Venture Fund to Find Growth Amid Cereal Slump

Kellogg Co., struggling with slumping U.S. cereal sales, will invest about $100 million in a venture fund, a bid to use a Silicon Valley approach to find the food industry’s next growth engine.

The fund -- named Eighteen94 Capital, a nod to the year the company’s flaked cereal was invented -- will look to take minority stakes in startups developing new packaging, ingredients, products and technology, Kellogg said in a statement Monday.

Kellogg joins packaged-food rivals General Mills Inc. and Campbell Soup Co. in turning to venture funds to cope with a changing industry. Big food companies have suffered from U.S. consumers shifting to more natural and fresh products, a move away from many grocery-store stalwarts. With startups taking market share, Campbell announced a $125 million venture fund in February. The General Mills fund, known as 301 Inc., has invested in companies such as Kite Hill and Beyond Meat that are working on the next generation of vegan products.

“As consumer preferences move toward more diverse tastes and trends, the pace of innovation in the packaged food industry continues to intensify,” Gary Pilnick, vice chairman of Battle Creek, Michigan-based Kellogg, said in Monday’s statement. “By investing directly in the most promising entrepreneurs and ventures, we can increase greatly our access to game-changing ideas and trends that could become significant sources of growth for us.”

Kellogg shares rose 0.5 percent to $77.18 as of 11:20 a.m. in New York on Monday. The stock had gained 6.2 percent this year through the end of last week.

(A previous version of this story was corrected to fix the reference to 1894 in the second paragraph.)

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