Food manufacturer Kellogg has invested in Cargo, a US business that allows drivers to earn extra income by selling products from snacks to personal care items.
The Special K and Pringles maker has taken part in a US$5.5m round of financing in Cargo alongside funds including CRCM Ventures, Techstars Ventures and Fontinalis Partners.
Kellogg's investment, the size of which was not disclosed, came through the company's Eighteen94 Capital, in-house, venture capital-style fund.
Approached for the rationale behind Kellogg's investment in Cargo, the US food giant referred enquiries to Cargo CEO and founder Jeff Cripe.
However, in a prepared statement, Simon Burton, the managing director of Eighteen94 Capital, said: "Cargo represents Eighteen94 capital fund's first channel investment. We see huge potential in the new consumer touchpoint within the passenger economy that Cargo is developing.
"Cargo provides brands with innovative opportunities to connect to the consumer in their moment of need. This platform will allow us to gather useful transactional data and collect permission-based consumer insights in real time."
Cargo is looking to use the round of financing to expand beyond test markets in New York, Chicago and Boston.
Cripe said Kellogg was already using the service to sell its products but said the company's investment would not lead to it getting better terms.
"Kellogg's is one of Cargo's biggest brand partners, but their investment stands alone from their activity as a Cargo brand partner. Cargo will continue to earn their business – we don't expect any handouts – and Kellogg's invested on the same deal terms as all other venture investors in the round. There are no specific carve outs to include products or dedicate space to Kellogg's portfolio brands," Cripe said.
"We're excited because this marks Kellogg's first investment in a distribution channel rather than an ingredient or consumer product company. We hope other CPGs will begin to view as in a similar light – as a new marketing channel that drives targeted exposure and product trial and, eventually, as a scalable, distributed retailer connecting millions of people with millions of products every day."
Asked why he thought Kellogg had invested in Cargo, Cripe added: "CPGs recognise that fixed location retail is evolving and brands need to find new ways to get into the hands of target consumers.
"Transportation trends – like the shift toward being a passenger in rideshare versus owning a car, the shift towards electric cars, and the prospect of autonomous fleets – mean that people will go to gas stations less which are important to convenience retail. Consumer preferences for e-commerce mean that people are going to stores less, which are important to impulse retail goods. Technology that enables lane-less consumer checkout may also also affect impulse purchases in-store.
"Eighteen94 Capital has, as part of its mandate, the goal to invest in new distribution channels. We are the first such investment, so it feels a little unusual, but I suspect it is actually core to their venture strategy. We engage with cutting edge consumer brands. There may be an opportunity for us to give Kellogg's exposure to quickly growing consumer product companies."
Dean Best is the managing editor of just-auto's sister site just-food.com