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The food and beverage sector is buzzing. New food niches and specialities are springing up every day, led by small and medium food and beverage businesses and startup innovators.

The rise of the food startup, like the tech frenzy of decades past, is boosting investment in the sector from high-profile investors such as Richard Branson and Bill Gates, and from large established food and beverage companies here and overseas through the establishment of venture funds and incubators.

According to Deloitte, global funding now being channeled to food and beverage start-ups is hitting a record high. Hundreds of deals - an estimated $US2.2bn - took place globally last year.

A funding frenzy

For big food, startup funding allows them to tap into their strengths and their scale while at the same time take measured risks on disruptive products, channels and business models.

General Mills, Kelloggs, Campbell Soup, Unilever and Chobani are among those to launch their own venture funds or incubators in order to diversify their portfolios and drive innovation. In one example, US meat giant Tyson Foods used a venture fund model to take a stake in disruptive plant-based protein company Beyond Meats.

IKEA Bootcamp, a startup accelerator from the Swedish flat-pack furniture (and food) giant, recently worked with ten startups including insect-protein producer Flying SpArk. Unilever’s global Foundry platform committed to ensure half of the startups it works with are female after research revealed gender bias in the startup ecosystem.

In Australia, we've seen the launch of the Chobani Food Incubator in partnership with Monash University's Food Innovation Centre. Lion’s Unleashed accelerator program is run by Slingshot and has worked with ten startups and scaleups including Perkii Probiotics and KegIt tracking software. And Coca-Cola Amatil has in recent months invested in a number of startups through its venturing platform Amatil X.

The urge to merge

We've also seen some interesting acquisitions over the year as large established players seek to align themselves with niche innovators. Soft drink giant PepsiCo acquired in-home drinks company SodaStream for a $US3.2 billion to boost its health and sustainability credentials.

Closer to home, George Weston Foods acquired gluten-free, non-dairy dips and snacks maker Yumi, and Patties Foods bought gourmet pie brand Boscastle.

The Coca-Cola Company acquired Organic & Raw Trading Co, an Aussie kombucha company that makes the MOJO brand of beverages, and also teamed up with CCA to buy a stake in innovative Melbourne beverage startup MADE Group.

Lion invested in Sydney-based Schibello Coffee to help accelerate its growth in hot beverages, and convenience chain 7-Eleven bought a majority stake in alcohol home delivery startup Tipple.

Raising the stakes

Innovators in fast moving niches, such as Hemp Foods Australia, and meal kit company Marley Spoon, meanwhile, are seeking to build scale with the help of the stock market with both embarking on ASX listings in recent months.

Crowdsourcing as a way to fund growth is another popular option in the food and beverage sector. Examples include ‘Naturally Sugar Free’ beverage innovator Nexba which launched a crowdfunding effort to kickstart its global expansion plans, and Vostok, a joint venture between 4 Pines Brewing Company and space engineering company Saber Astronautic. Vostok launched an Indiegogo crowdfunding campaign to fund research into the creation of a Space Beer bottle.

The SOFI Spritz cocktail brand, which found its footing at The Bondi Farmers Market, scaled up with the help of a couple of crowdfunding campaigns on Pozilble.

Consumer appetites

All of this innovation is being driven by fast changing consumer preferences, food sustainability issues, and technology advances.

Rising consumer demand for healthier, more convenient and functional food products is a key driver of product and process developments, but innovation is spreading beyond these areas and into the disruptive realm.

The rise of the online subscription model is just one example, with the launch of products such as Cocktail Porter, which delivers bartender-designed cocktail kits to the door.

Cryptocurrency is another hotbed of innovation, with consumer engagement platforms such as Shping being developed to help food and beverage brands build deeper consumer engagement.

So who are all of these budding entrepreneurs and SME company founders? That is what our monthly Rising Star feature seeks to reveal. They come from all walks of life - yoga teachers, students, chefs, dietitians, marketing and advertising execs, IT managers, and scientists.

Come and meet our 2018 Rising Stars.

Packaging News

National Recycling Week has seen industry join with Planet Ark to promote recycling, including TerraCycle, which launched more than 100 new zero-waste solutions in Australia.

Federal and state environment ministers have developed a new National Waste Policy Action Plan, and aim to ban exports of waste by 2022, in moves applauded by APCO.

Oji Fibre Solutions will invest around $100m towards a new automated cardboard box plant development in Christchurch, which will replace its existing operation.