The business landscape has rarely been tougher for food & drink companies. But the increasing consumer focus on natural, healthy, and organic products is creating opportunities for smaller, more ‘authentic’ independent lines.

The giants have other headwinds to contend with, too. Consumer sentiment in many developed economies has weakened, particularly in the UK following the EU referendum.

Some established names have deployed capital to increase exposure to new challenger brands. Campbell’s, Kellogg’s and Danone are among the large food and drink businesses with in-house venture capital funds.

These moves make strategic sense. The current upward trend in consumer spend towards ‘alternative’ brands is unlikely to be a blip. This trend is replicated across a range of categories, from beer to breakfast cereals. Investments in smaller, disruptive brands helps established global ones hedge against changing consumer behaviours.

Second, there is also a recognition that startups can often innovate faster and more effectively.

This point was demonstrated at the recent Foodbytes! event, held at the F&A Next conference in the Netherlands, in which fledgling brands pitched for investment. The startups seeking to disrupt the sector included Koupe, which has developed a high-protein, low-sugar and low-fat ice cream, winning a listing at Ocado in the process.

For established firms, in-house corporate VC activity offers a way of demonstrating a commitment to innovation other than traditional R&D investment while also providing opportunities to aid fast-growing ‘young’ brands alongside the more incremental progress of mature ranges.

For captive VC funds, investments in startups provide a stake in the next generation of exciting food and agri brands and technologies whose mission and vision are aligned with the company. We expect food and beverage corporates to increasingly deploy capital in startups and disruptors - we continue to see stiff competition for the most promising businesses.

Richard O’Gorman is director of the Rabo Food & Agri Innovation Fund