Iroquois Valley has purchased roughly 4,500 acres of farmland—around 50 typically middle-sized family farms—in 13 states, with most of that land concentrated in Indiana, Illinois and Michigan. The farmers come to them, Miller says, and continue to run their own businesses—another clue that mind sets have begun to change.
“For decades, big industry has told farmers that organic doesn’t work,” says Craig Wichner, co-founder and managing partner at Farmland LP, a sustainable farmland investment company that currently owns 13,000 acres in the Northwest. “But it’s the unsustainable agriculture practices that fail.”
Like Iroquois Valley, Farmland LP acquires undervalued farmland and converts it into organic practices. It differs in that it manages the properties. Wichner says the firm’s organic acres generate 72% more revenue per acre than its conventional fields because of the supply-demand imbalance.
Growing demand for organics makes the mainstream food and agriculture industry nervous. This is why you see the likes of Cargill Ventures investing in Memphis Meats, and it’s a big part of the reason corporate giants such as General Mills, Kellogg and Hain Celestial have all launched their own venture capital arms in the last couple of years.
This raises questions about the consolidation trend in the food industry; many organic/sustainable brands are being gobbled up by corporations—Ben & Jerry’s by Unilever; Annie’s Homegrown by General Mills; Stonyfield Farm by Danone. The list goes on. Does this leave impact investors with fewer opportunities? And does it dilute the end goal?
Folks involved in the sector don’t seem to think so.
“Typically what we’ve seen is that consolidation happens later in the cycle. It might not be until a company hits $100 million to $200 million in revenue,” says Michael Whelchel, co-founder and managing partner of Big Path Capital, a boutique investment bank focused on impact investments. It’s a company’s period before consolidation that’s “actually a really nice phase for one of our family office investors,” Whelchel says. “They can come in when the revenue is greater than $10 million or $20 million and watch the company grow 10-fold.”
As for whether a corporate acquisition dilutes the goal of sustainability, many seem to think it does the opposite—social entrepreneurs not only ensure that their mission continues when they sell, but these acquisitions can have a positive effect on the larger corporate culture. A corporate parent also, undeniably, brings scale to an operation.
Renewal’s Richardson explains this point of view with the example of Sweet Earth, a vegan food company Renewal invested in that Nestlé acquired in September.
“If our goal is to encourage more people to eat plant proteins rather than animal proteins because of the huge environmental impact of that decision, think about Sweet Earth’s potential to become a billion dollar brand with Nestlé’s distribution arm behind it,” Richardson says. “Then think about the amount of water and CO2 emissions that will be saved by that growth. We think that’s pretty exciting.”