Chomps Plans to Expand Portfolio With $80M Raise, Says ‘No’ to Company’s Sale
Having just secured $80 million in funding from venture firm Stride Consumer meat snack brand Chomps is planning to use the capital to broaden its product assortment and make a move into convenience retail, said CEO and co-founder Peter Maldonado today.
Launched in 2012, Chicago and Naples, Florida -based Chomps, which touts its use of sustainably sourced protein across its line of meat sticks, is part of a cohort of meat snack brands that has recently found traction with investors through positioning around health and wellness. Whole30-focused The New Primal raised $15 million last July, grass-fed meat snack brand Country Archer raised $12 million in 2020 and last year Mighty Spark was acquired by private equity firm Swander Pace Capital through its Branch Brook Holdings group.
The $80 million raise, based on a $100 run rate for the last quarter of 2021, gives the company a valuation of $200 to $300 million and maintains Maldonado and co-founder/COO Rashid Ali as majority stakeholders. Both will hold seats on the company’s newly formed board of directors, with Stride’s Juan Marcos Hill and Michael Banu holding two seats and one additional seat reserved for a member to be selected by Ali and Maldonado.
Maldonado said the company also received offers for a full buyout, but declined to do so at this time.
“We wanted to maintain control of the business,” Maldonado said. “We’re super excited about the future and our ability to execute and continue building this brand.”
The first step of that growth will involve expanding distribution within existing channels, with Maldonado stating the company is “still in our infancy in terms of distribution.” For the first four years of the business the company was exclusively sold direct-to-consumer, before expanding into Trader Joes in 2016 and then other brick-and-mortar retail in 2018. To-date, those placements have been in natural, speciality, drug and mass stores as well as conventional grocers.
Moving forward, Chomps wants to not only add more retailers within those classes of business but also gain front-end and off shelf displays in order to play into the product’s impulse purchase positioning.
In the back half of the year and into 2023, Chomps plans to expand into c-stores, he said, one of the leading sales channels for meat snacks, particularly sticks. Maldonado said he believes that Chomps can challenge the channel’s category leaders, such as Jack Links and Slim Jim, because of its loyal fans and brand identity, but will still move into the channel deliberately, first partnering with a retailer who can offer a solid brand block. Other meat snack brands have also aspired to be major players in the category, even creating specific SKUs to target the convenience shopper, but to-date have not seen much traction.
“You need to come in, prove yourself, establish yourself in a handful of stores, build up that data and then you’ll be able to meet with those buyers,” Maldonado said. “What we’re trying to do is make sure that we don’t go in and take that shot until we’re ready for it…we’re very confident that there will be demand at c-store for us even at a premium [price].”
To support the growth, Chomps plans to diversify its manufacturing processes by bringing on a second copacker, with the potential to to add more. The company owns its equipment within the original coman’s facility and this year will add two more lines.
In the longer term, Chomps hopes to expand beyond meat snacks into other snacking categories. Maldonado, a former personal trainer, said the company was created to help consumers add more protein to their diets. Since then, he added, “protein has blown up” and consumers are looking for snacking options that offer other macronutrients, such as fiber. Rather than try to do a plant-based or plant-enhanced meat stick (ala Krave’s former legume and meat stick) Chomps will look to other categories and places where it can clean up classic snacks.
In the category at-large, consumer interest has shifted from jerky and meat bars, the latter of which has largely been discontinued, to meat sticks. According to National Retail Solutions (NRS) data cited by CStore Decisions, meat snack sales grew 38.7% in 2021, led by 43.6% growth in meat sticks between July 1 and Sept. 30, compared to the same time frame in 2020. The move is driven by both the meat sticks’ reduced sugar content, as compared to jerky, as well as portability and low price. Still, many brands in the category are struggling to compete against conventional players. In the past two years Perky Jerky declared bankruptcy and Chef’s Cut and Krave sold to Sonoma Brands after their prior owners were unable to staunch losses.
“Our customer base…views Chomps as a snacking business, not just a niche business, and we do have permission for extendibility into other adjacencies even outside of snacking,” Maldonado said. “We realize that for us to build a billion dollar brand, which we have aspirations to do, we’re going to have to innovate outside of the category.”
Private equity funding usually comes with the expectation that at some point there will be an exit in order to give the firm, and its limited partners, liquidity. Maldonado said while he and Ali have not made any long-term plans about their own futures with Chomps, that could include eventually selling the brand or buying out Stride.
“If we built this business into something huge and it’s a legacy brand, then I would prefer to keep it within our families, he said. “There are other ways to give [investors] liquidity.”
