How do you grow an $81 billion food company, already the world's largest? For Nestlé, there are multiple answers. Among them: Build a $3 billion Halal food business to serve the world's 1.6 billion Muslims. Make acquisitions when the opportunity arises, as happened last month when Nestlé agreed to buy the Gerber babyfood business from Novartis for $5.5 billion. And commit about $900 million to five different corporate venture funds to invest in startups pursuing ideas in health and wellness foods, marketing technology and a variety of other things, such as home delivery of pet medications. "Doing all your innovation in-house is a lost cause," says Steve Allen, vice president of new business development for Nestlé USA in Glendale, Calif. "This is a structure to tap into the entrepreneurial world."

That a conservative Swiss company would take up venture investing on this scale may seem surprising. But it's of a piece with other developments in consumer-products land, from Blackstone Group's purchase of Pinnacle Foods for $2.16 billion in February, to the success of activist investor Nelson Peltz in getting Cadbury Schweppes to put its soft-drink business up for sale in mid-March to the completion of Kraft's spinout from Altria at the end of that month. Underlying them all: the realities of a vast, slow-growth industry with hundreds of billions of dollars coursing through it, facing pressures from all sides to change and adapt.

Innovation in this context rarely means the kind of game-changing move you might expect from, say, Google. Instead it means finding products like PowerBar, created by an entrepreneur, sold in bicycle shops and acquired by Nestlé for an estimated $375 million in 2000. And yet for those outside the sector with an interest in corporate development, there's plenty of hard-earned knowledge to study here. "From a post-deal standpoint, they've learned from their mistakes," says John Grubb, a managing partner at Boulder, Colo., consumer products strategy firm Sterling Rice.

And also their successes. As you'll see in our articles, the products themselves may not change that much, but in the world of transactions, the companies that make them continue to blaze trails. - Kenneth Klee

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