PepsiCo has chosen Texas-based sugar-free kids beverage company Hapi Drinks as the recipient of final $100,000 grant through its North American Nutrition Greenhouse program.

The U.S. food and beverage giant did not disclose whether it was taking an equity stake in Hapi.

PepsiCo launched the accelerator program in the fall of 2018 with 10 participating startups—four of them are healthy snacks companies, including high-protein snacks brand Bohana made with popped water lily seeds, IQ Bar formulated for cognitive energy and grain-free granola producer Wildway.

Each of the startups initially received $20,000 in grant funding and participated in a six-month business optimization program. These companies also had a partnership with PepsiCo mentors who are experts in strategic planning, brand and product development, as well as supply chain management.

All 10 companies together grew their revenues by an average of 200% during the program, PepsiCo announced in a prepared statement. Other successes include the launch of new product lines and digital campaigns that have driven sales and new customer acquisitions

PepsiCo ventures group managing director, Daniel Grubbs, said: “We are so proud of the progress that each of the 10 companies achieved in the last six months, and it’s a testament to what happens when big and small brands come together.

“More than that, the program has provided a very unique leadership experience for our colleague-mentors, who all feel energized by the agility, speed, and creativity that the entrepreneurs have embodied,” he added.

The launch of Nutrition Greenhouse underlines the need for consumer packaged goods companies to stay close to the dynamics of the fast-changing food industry so they can adopt new knowledge in their R&D.

“We see it as a great way to keep the blood moving,” Grubbs said. But more importantly, “these companies are delivering something unique [in terms of nutritional profile] to the consumer, so we wanted to help them scale.”

PepsiCo also previously operated a separate Nutrition Greenhouse program in Europe and selected Israeli plant-based yogurt company Yofix in January as the final €100,000 ($112,505) grant recipient.

Market need for healthy kids’ food

Commenting on the selection process for the Nutrition Greenhouse program winner, Grubbs noted: “Hapi delivers a set of metrics that mentors and the committee are evaluated for. They particularly stood out for their ability to collaborate with their mentors and other companies.”

Dr. Kennett Parks founded Hapi in 2011 after witnessing the rise of childhood obesity in society. He wanted to create a product that would address the juvenile diabetes and sugar-induced tooth decay. Karsten Idsal later joined the company as cofounder and CEO in 2014.

Currently available on Amazon, Hapi offers four flavors through its product line, including Grape D’Vine, Pure Punch, Apple Joy and Strawberry Kiwi.

According to venture capital company Pitchbook Data, Hapi previously raised $850,000 in funding via two angel investors in May last year.

Idsal said: “The insights, guidance, and connections my PepsiCo mentors provided were invaluable and essential to unlocking new growth avenues for Hapi Drinks. “We are passionate about our mission to fight childhood obesity by providing great tasting sugar-free kids drinks and it is fantastic to get PepsiCo’s support in our efforts.”

Hapi’s product proposition particularly resonates well with the booming kids’ food market as a recent national study by Amplify Snack Brands and the Center for Generational Kinetics showed that 55% of millennial moms said their kids are more likely to choose a better-for-you snack over another packaged product.

Packaged Facts also noted that the kids’ food market requires marketers to take a dual approach to satisfy the needs and interests of both children and parents, the category purchaser.

“The influence of kids on the household grocery habits is well documented, but parents are becoming more determined to find a happy medium with products that satisfy the kids without sacrificing nutrition. And there’s a lot of money at stake,” the market research firm said.

Specifically, “a third of parents seek out products from specialty brands with values they support, compared to barely 18% of those without kids,” it added.

Large food companies have also capitalized on the market trend with PepsiCo launching organic fruit juice line, Tropicana Kids, about a year ago.

Upcoming plans for Nutrition Greenhouse

PepsiCo is currently in the planning stage for the next North American Nutrition Greenhouse cohort and is looking at new food categories beyond snacks and beverages for potential partnerships, according to Grubbs.

However, the timing for the next round has yet to be determined.

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