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Dive Brief:
- Mondelēz International’s corporate venture capital arm, SnackFutures Ventures, purchased a minority stake in Urban Legend, a fast-growing, fresh doughnut and pastry business in the U.K. Financial terms of the deal were not disclosed.
- The investment aligns with Mondelēz’s plans to grow in the better-for-you fresh bakery section while expanding further into cakes and pastries. Urban Legend’s air frying technology reduces sugar, fat and calories by up to 75% compared with traditionally made doughnuts.
- SnackFutures was created in 2018 to strengthen Mondelēz’s already dominant position in snacking by investing in promising young brands and technologies. Initially, SnackFutures also created its own brands but in 2023 switched to only investing in established products it could potentially acquire.
Dive Insight:
Mondelēz’s presence in snacking is largely centered around crackers, bars and cookies, including Ritz, Clif, Tate’s and Oreo. But the Chicago-based company has openly discussed its desire to move deeper into cakes and pastries. Urban Legend brings Mondelēz into doughnuts, an offering it doesn’t have elsewhere in its portfolio.
Its investment in Urban Legend checks off several boxes for Mondelēz. It not only establishes a deeper presence in cakes and pastries but does so with a brand that has a healthier reputation in a segment typically not associated with it. All Urban Legend doughnut varieties have 200 calories or fewer, Mondelēz noted.
“When I heard about Urban Legend from our UK team, it made perfect sense to take a look at given its strategic fit in bakery, unique technology and its potential to disrupt snacking — all important parts of the SnackFutures Ventures investment thesis,” Richie Gray, global head of SnackFutures Ventures, said in an email to Food Dive.
SnackFutures Ventures first noticed Urban Legend about a year ago and spent much of that time learning more about the business, its founder and exploring ways the two companies could partner, Gray added. While Urban Legend has focused on doughnuts, it is expanding into cinnamon roles. Gray called the company’s promise as a larger player in better-for-you bakery “very interesting.
The Urban Legend portfolio includes a dozen varieties sold in nearly 200 stores throughout the U.K., located in stand-alone bakery cabinets.
SnackFutures’ investment is one of the first since it changed its business model to purchase stakes in already established startups. This strategy allows Mondelēz to enter or strengthen its position in rapidly growing market segments. Additionally, the packaged food company can work with technologies or strategies that it can then apply to its other global brands.
By purchasing a minority stake in Urban Legend, Mondelēz gets these and other benefits. If Urban Legend continues to thrive and reaches a meaningful size that could help Mondelēz grow sales and improve margins, it could decide to purchase the rest of the company.
Gray said in an email to Food Dive that SnackFutures’ strategy is to purchase minority stakes in brands or companies that are too small to acquire and help scale them with Mondelēz’s investment and experience.
Mondelēz’s growth in the cakes and pastries sector has largely been driven by acquisitions. In 2020, it acquired Give & Go, a U.S.-based maker of brownies, cupcakes, and other items. A year later, it added Chipita, a player in croissants and baked snacks in Central and Eastern Europe. And last week, Mondelēz purchased a “significant majority stake” in Evirth, a leading manufacturer of cakes and pastries in China.
Hu, a maker of premium snacks and chocolates made from simple ingredients, is the only company SnackFutures investment that its parent has acquired. It was purchased for an undisclosed amount in 2021.
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