Santatera Sticks To U.S. CPG Thesis Despite Trade War

Early-stage CPG food and beverage businesses often bring narrow margins and a high degree of operational complexity to the table. Add in the current, on-and-off trade war, along with the associated supply chain challenges, and any international investment firm would likely press pause on new ventures.

But Mexico-based asset manager Santatera Capital, which allocates an $80 million fund to early-stage food and beverage brands, is continuing to dole out cash, most recently investing $1 million into better-for-you confections company Refresh Gum. The firm has always counted its strategic support as a key differentiator, explained Santatera associate Ignacio Reséndiz, but these businesses will need it now more than ever.

“Both [the U.S. and Mexico] have had an extraordinary relationship, and in some ways, we depend on each other, so we hope this ends soon,” Reséndiz said.

As tariffs put additional pressure on margins, the venture firm is navigating an added layer of complexity while assessing potential investments. Reséndiz said that while Santatera won’t change its thesis – which is focused on CPG food and beverage companies doing business in, or looking to expand to, the U.S – the firm will likely put a greater emphasis on emerging categories and product types with high margins.

“We’re going to continue supporting our companies… [but] we [will be] looking for companies with strong margins, so that if these tariffs are going to hit again, the margin impact is not going to be so hard,” said Reséndiz. “The advantage that we have is our investors have presence in both countries, and we can help negotiate some terms, or we can move some parts of the supplier value chain to either one of the two countries.”

Santatera has honed a unique capacity for helping companies grow and reduce costs by realigning or scaling up sourcing through its vast network of limited partners, which includes major food producers and processors throughout Latin America. Within its advisory board alone sits Chosen Foods chairman Gabriel Pérez Krieb, SOMOS Foods CEO Miguel Leal and Electrolit CEO Christian Patiño Webb.

In the case of New York-based Refresh, its hero chicle ingredient is sourced from trees that grow in Mexico, giving Santatera both supply chain synergies and the entry into the U.S. confections category it had been seeking. Reséndiz said the firm was attracted to Refresh’s strong velocities, business management and capital efficiency, as well as founder and CEO Ryan Stafford’s “innovative and disruptive” approach to the category.

“When brands are raising money, there’s a lot of challenges and complexities. You’ve got to find the right partner. There’s a lot of no’s [then] you get some yes’s, and it’s about finding which opportunity makes the most sense,” Stafford said. “We found a really good partner [in Santatera] that believed in our mission, believed in what we’re doing here, and believes in our industry more so than others.”

The natural, plant-based gum business is currently gaining traction in the Midwest market as well as in conventional retail, Stafford told Nosh. Currently the company’s only employee, Stafford intends to use the new cash to build out the team as well as support and promote the brand at retail in addition to expanding into new channels such as travel and foodservice. The company also has a new larger pack size launching exclusively in the value channel.

In order to keep Refresh’s supply chain flowing, strategic support will be integral. Santatera’s portfolio already includes many CPG success stories such as wildwonder, Tia Luptia, Mezcla, Onda and more. Soon, the company will add Mexico-based BirdMan to its ranks as the organic, vegan protein powder producer works to increase its presence in the U.S. market.

But sourcing isn’t Santatera’s only strategic advantage. The firm is also backing a new $7 million venture fund and accelerator program known as Ignite20, which was launched late last month by investor and entrepreneur Gabriela Morales. Ignite20 aims to invest in 20 CPG startups per year spanning health, beauty, food, beverage, and pet care categories with a goal of notching 60 investments over a three-year period.

While a typical check from Santatera’s fund ranges from $1 million to $2.5 million, with room for reinvestments in the $4.5 million to $5 million range, this new program will give the firm inroads with smaller, attractive businesses in need of strategic support but are not yet ready for Santatera’s investment.

“We receive a lot of deal flow, and these are companies that may seem smaller for us or that maybe do not need funds but more of a strategic approach,” Reséndiz explained. “That’s where I make introductions with Gabriela – I like to say that we are like siblings. We take a look at the larger companies, and she takes a look at smaller ones.”

The Ignite20 program will include $50,000 in capital investment in addition to strategic guidance including a 12-week hybrid course culminating in a demo in Bentonville, Ark., 70 hours of specialized training, one-on-one founder-to-founder coaching and direct access to retail buyers, distributors and follow-on investors. Redwood Ventures and RPM Food are also backing the program.

“Ignite20 Ventures’ mission is to provide emerging CPG brands with the resources they need to break through to the next level in an increasingly competitive and complex industry,” Morales said in a statement. “As a CPG founder myself, I understand firsthand the challenges these entrepreneurs face and the impact the right strategic investment and guidance can have on their success.”