Better together: Why some food companies enter into partnerships

When Nikhil Arora and Alejandro Velez started Back to the Roots in 2009, they had a vision for an indoor agriculture company.

They sold grow-your-own mushroom kits, gardens in jars and herb gardens. Looking at the food system, they saw opportunity in other categories. And in 2015, the company expanded into a new area: cereal.
“We launched [all of our products] out of passion and curiosity, not really having a sense of category,” Arora told Food Dive.

The cereal line has been successful, bringing a new organic breakfast option to consumers — as well as to more than a million public school children, including those in New York City. Last year, the brand was the No. 2 driver of growth in the cereal category at Whole Foods, Arora said.

Meanwhile, the indoor farming line of products is taking off. It’s a trendy idea, and Arora said it’s now a $1 billion category. Back to the Roots is launching an indoor gardening line at Home Depot. They’re helping Target and Lowe’s build out their indoor gardening sections, and gardening products are launching at Costco and Whole Foods.

“We had these two lines of business, and both ultimately go toward the same mission, but we’ve been thinking how do we best accelerate, best achieve that mission of getting these values, this brand, into every home and every classroom,” Arora said.

Moving the cereal business forward requires a lot of time, effort and capital. And opportunities are presenting themselves everywhere in the indoor farming business. Arora did what made the most sense: Find a partner with similar values to run the cereal portion of the business.

Now Nature’s Path, the largest organic cereal company in the U.S., runs the ingredient sourcing, distribution, manufacturing and supply chain aspects of Back to the Roots cereal. Items such as Back to the Roots Biodynamic Cinnamon Flakes still belong to Back to the Roots. Recipes and packages won’t be changed without Back to the Roots approval. But, Arora said, those products now will benefit from the category expertise of a longtime leader.

“Technically, we were competitors. We’re both on the shelf and we’re both trying to reach the consumer,” Arora said. “But realizing and stepping back, there’s a much bigger challenge and opportunity if we’re doing this together, so I think it’s turned into a kind of unique collaboration.”

The Back to the Roots partnership with Nature’s Path is just one example of food companies working together. In an industry that seems to be dominated by M&A, these partnerships tend to fly below the radar. Partnerships are somewhat rare in today’s food business, showing an alternative to the kind of cutthroat competition elsewhere in the food and beverage industry. Many of these partnerships are formed between entities that would otherwise be competitors.