Deals, Deals, Deals; ACG's Strategy for Fund V; and Hamwaiian Shirts
Plus (Gift) Basket Building; Corn-Free Popcorn; and New Positioning for Yogurt Pouches
It’s hot weather here in Boston, but today's newsletter contains news about cold hard cash. Early signs of a positive shift in the economic climate? (We’ll ignore the environmental climate) Send me your thoughts!
Also, use the button below or head on over to the tips page to share your news with me. I’ve heard from so many of you and I’m excited for even more conversations.
With Cash Influx, Is Lotus Foods Ready for a New Bloom?
Yesterday Lotus Foods announced a $22.5 million investment from Grounded Capital. So, what's next for this rice and noodle brand? I chatted with CEO Andrew Burke to get the inside scoop.
Co-founders Caryl Levine and Ken Lee brought Burke on board four years ago. While they’re still actively involved in the company’s strategy and direction, Burke oversees the day-to-day operations of the business.
Burke confirmed Levine and Lee were the largest shareholders before Grounded’s investment. Some of the $22.5 million went towards offering liquidity to early investors and shareholders and Burke declined to comment on the ownership structure following the deal.
Currently, the thirty-year-old brand sells 40 SKUs across rice, noodles, and instant ramen. Almost as important as the product line is Lotus’ mission to promote sustainable and ethical rice production, improve the livelihoods of small farmers, and reduce agriculture's environmental impact.
Grounded Capital’s support for this mission was a “non-negotiable,” Burke said, and key to the deal going through.
The new capital will go towards two main areas: developing the product portfolio by launching new SKUs and "reinventing" others, and expanding into conventional grocery stores to reach new shoppers.
ACG Closes Fifth Fund; Sees Rising Opportunities in Food and Bev
Investment firm Alliance Consumer Growth Partners (ACG) has closed its fifth fund and is ready to invest in food and beverage brands.
At $160 million, Fund Five is smaller than ACG’s fourth fund ($350M) and third fund ($210M). While the dollar amount reflects the tighter capital market, co-founder and managing partner Josh Goldin told me that the size also better reflects ACG’s refined strategy.
“We are always trying to figure out, and it’s evolved over time, the right number of investments in a fund,” Goldin said. “[It works best when] you say, ‘Okay, we're gonna go make seven or eight or nine investments, and based on our average check size, what's actually the right amount of capital to go into the fund?”
Aside from Athletic Brewing, Fund Four focused largely on apparel, beauty, and skincare, diverging from ACG’s history of backing food brands like Krave Jerky and Suja. Supply chain challenges in food and beverage, coupled with higher margins in non-food sectors, certainly contributed to the Fund Four’s makeup, Goldin said. However, ACG has already invested out of Fund V in Momofuku Goods, and Goldin said he predicts adding more food and beverage brands to the firm’s portfolio.
“The hard part is still capturing really good economics when you're subscale,” Goldin said. “If you’re a $30 million food company, and you're selling at a 15% premium to the national big brands, it's pretty hard to have an amazing product and still have great margins and economics. That's the rare part.”
Read My Whole Interview with Goldin Here.
1-800-Flowers Looks to Build Basket Size with Scharffen Berger Pickup
Scharffen Berger is once again owned by a publicly traded company following last week's announcement that 1-800-Flowers acquired the chocolate company.
Terms of the deal were not disclosed but according to a LinkedIn post from a former employee, the entire senior executive team at Scharffen Berger was let go.
Scharffen Berger has had a tumultuous ownership history. Founded in 1996, it was later acquired by Hershey's in 2005. Recognizing that the high-end chocolate market wasn't a good fit, Hershey's divested the brand in 2000, selling it to former Concord Confections president Paul Cherrie and Hampton Roads Capital.
Over the last year, the brand rolled out refreshed packaging and expanded into new categories such as snacking, with the launch of Breaks — a better-for-you BarkThin’s type product.
No word yet on what led to the recent sale but the soaring price of cacao has certainly made it difficult to be an independently owned chocolate brand.
That will be less of an issue for 1-800-Flowers, which owns several brands that utilize cacao. Executives at the $2 billion brand previously told analysts that they have locked in cacao pricing for the year, thus mitigating some of the blow from rising supply chain costs.
Buying Scharffen Berger fits with 1-800-Flower’s plan to own a portfolio of complementary brands that can, quite literally, build (gift) baskets.
Read Up on the Deal and 1-800-Flowers’ Strategy Here
Oh, Cheeze Whiz! Credo Foods this week launched spray-can cheese, my second favorite canned dairy product after whipped cream. (Are there others?) With its most recent launches including center store items such as plant-based queso, alfredo sauce, and nacho cheese dip, Credo has clearly diverged from other plant-based dairy brands, which have largely focused on the chilled dairy case.
The packaging is playful and it’s an interesting addition to the portfolio for sure, but if I was interviewing Credo, here’s what I would ask:
Research indicates the spray cheese market is set to grow from $1.4 million in 2023 to $2.1 million by 2033. The big question: how much of this market does Credo need to capture for this venture to pay off?
Are spray cheese consumers seeking a better-for-you option, or given the product they are buying, do they care?
Key players in this arena include giants like Kraft Heinz, Bel Group, Lactalis, Fonterra Food, Savencia, and Dairy Farmers of America. Is there space for an emerging brand, or is the market dominated by incumbents and their pricing power?
A fun aside, Berner Foods claims to produce 98% of the spray cheese on the market, churning out nearly 80 million cans over the last three years.
News Bites
DC-based distributor, incubator, and community kitchen Union Kitchen opened a new storefront at Dulles Airport, offering emerging local brands a global stage.
I'm not familiar with The Black Leaf Tea & Culture Shop, but its owner’s story made me wince. It's unfortunately all too common to see brands invest heavily in trade shows, events, or conferences and then see disappointing returns. Repeat after me: if attending an event could hurt your company, just say “no.” That said, the company has big goals, so consider supporting their GoFundMe. Along those lines, let's commend the owners of beverage brand Kekeda for their honesty.
Talk about upcycling. Big Idea Ventures has launched Bayou Best Foods, a new plant-based seafood company that utilizes IP from the now-defunct startup New Wave Foods. What caught my eye, however, was the appointment of Kelli Willson as CEO. With extensive experience in CPG quality, operations, and regulatory compliance, I believe that Willson's hiring speaks to critical pain points plant-based companies are facing.
In other moves, Taika COO Kal Freese has departed the beverage brand to join "sleep fitness company" Eight Sleep as its Special Projects Lead.
Breaking from our usual beat, Subway added three new sandwiches to its menu— bringing barbecue sauce back to the sandwich chain for the first time in three years. This caught me off guard because BBQ seems like it would be such a standard condiment at Subway. Frankly, I’m surprised its not some cobranded option with Sweet Baby Ray’s. I'm also all for this SubKrunch topping—think croutons for your sandwich. Sound odd? Try potato chips in your sandwich and tell me the texture isn’t better.
From pickle earrings to Hamwaiian shirts, Dietz and Watson's swag drop has me swooning. Their rebranding efforts targeting younger shoppers impressed me at last year Expo East — I won a “meat sweats” set of sweat socks — and the line feels authentic to the new brand ethos. I appreciate, as well, that’s more about conversation pieces rather than branded items. Now, I need to decide if pickle earrings pair well with a Fishwife necklace.
Distro News: S’Noods is now available at 160 Fresh Market locations, and The Three Little Pigs Sou Vide Meals can be found in Safeway and Acme stores across the Mid-Atlantic region.
New Products:
This is more of a “new to me” type product, but I have to rave about Mezzetta’s Roasted Red Peppers Mediterranean Hot Sauce. I don’t particularly like roasted peppers, but this is my solution to every this-dish-needs-something conundrum.
In collaboration news, Michelle’s Granola and SIMPLi joined forces to create a limited edition Strawberry & Red Quinoa Granola that features SIMPLi’s Regenerative Organic Certified Red Quinoa. If it's anything like Michelle’s other offerings, it's a must-buy.
Premium matcha brand matchawell launched this week. In a clever twist, matchawell has named its two tea offerings “The Daily” and “The Weekender” to highlight quality differences between SKUs.
Hoping to capitalize on the nutritional benefits of yogurt, Siggi’s has rolled out Protein Packs. Will adults warm up to food in pouches? It's been a tough sell for many brands.
On the snack front, newcomer Cob describes their popped sorghum snacks as “corn-free popcorn.” Clever marketing? Many shoppers don’t know what sorghum is, so perhaps the wording will inspire them to look further and ask “if it’s not corn, what is it?!”