CPG Week: A Daring Deal and Danone’s Dogged Pursuit of Lifeway Foods

[00:00:05] Monica Watrous: Welcome to the CPG Week podcast by BevNET and Nosh. I'm Monica Watrous, here with my co-host, Brad Avery. Now, here is the latest in food and beverage industry news. Plant-based poultry producer Daring Foods has been acquired by Australian Alt Protein Company, V2 Food, with backing by Ajinomoto Company Incorporated. Financial terms of the transaction were not disclosed. Jeff Gendelman, CEO of Daring Foods, told Nosh the partnership will leverage the scale and frozen food expertise of Ajinomoto and the proprietary protein technology of V2Food, bringing the brand into new protein formats and meal occasions across retail and food service channels. Since its inception, Daring Foods has used high-moisture extrusion technology to make plant-based takes on chicken, formulated with a short list of simple ingredients including soy, vegetable oil, and natural flavors and spices. Joining forces with V2Food unlocks a range of solutions for developing and manufacturing a broader platform of plant-based products beyond its current assortment, which includes frozen, breaded, and unbreaded pieces and wings, as well as a line of single-serve vegetarian meals. Daring Foods products are sold in about 16,000 to 17,000 retail doors nationwide. And while the alt-meat category has been contracting in recent years, the business is growing by double digits year over year, according to Gendelman.

[00:01:30] Brad Avery: Yeah, it does seem like a real silver lining in that category. And I'm curious a bit about, is this a strong target for an acquisition? And why are they doing so much better than all these other competitors that are really struggling at the moment?

[00:01:44] Monica Watrous: Well, I think the differentiator for daring food is really it's clean label profile. I mean, it does include some ingredients that some consumers may perceive as quote unquote unclean, um, such as soy and seed oil, but it's not created with methyl cellulose and a lot of those other ingredients that people tend to shy away from in products like beyond me and impossible burger.

[00:02:15] Brad Avery: Well, moving on, with yet another push for acquisition by Danone hanging over it, Lifeway Foods has reported yet another strong financial quarter in its Q2 earnings report. The kefir maker announced net sales growth of 9.7% to $53.9 million for the quarter, marking another internal record for Lifeway, as well as the 23rd consecutive quarter of positive growth. That consistent growth has made it an object of desire for Danone, a minority 23% stakeholder in the public company, which is now on its third attempt to acquire the business outright. Previous attempts were shot down, with Lifeway even adopting a poison pill to prevent a hostile takeover. In an April chat with Forbes, Lifeway CEO Julie Smolianski described Danone's efforts as predatory, noting that the relationship between the two companies began in 99, when her late father ran the company and that Danone has since been undermining Lifeway, allegedly by blocking it from growing overseas and refusing to help its source cheaper ingredients. But perhaps Danone will take a softer approach on this third attempt, and perhaps LifeWay is opening up as well. This month, the two companies entered a confidentiality agreement to help facilitate Danone's further review of a potential acquisition, and LifeWay representatives were the ones to reach out to Danone, hoping to reset the relationship.

[00:03:31] Monica Watrous: I mean, I can't think of another company that has more drama or- It just keeps going on.

[00:03:39] Brad Avery: I feel bad that the drama keeps coming up because I don't think Julie Smolianski is to blame for a lot of it. There's a degree to which she has been running this company and they've shown again and again consistent growth and regular growth. Now I do fully understand that her brother Edward Smolianski and her mother Lumilla Smolianski, they have their own concerns. They've made allegations about the way the board conducts itself and allegations of Favoritism going on within and that's what they claim and I do think that the earnings results though show that Julie has been. During a pretty tight ship and it makes sense why day known is so aggressive and wanting to acquire the business as well. Danone may have also just come on too strong with its initial acquisition efforts because they may have lowballed. They may have then gotten angry. I don't know exactly what happened, but the Forbes report that kind of goes into it from April definitely paints a picture of personal clashing, you know, leading to this strong opposition to a deal when maybe now finally there is a chance for a deal to happen and it could be a big benefit for both companies.

[00:04:58] Monica Watrous: Of course, we will continue to report on any new developments in the Lifeway Foods and Danone saga. And speaking of acquisition targets, Japanese barbecue sauce slinger Batchans may be the latest condiment brand to explore an exit, according to Axios Pro. Citing three sources familiar with the matter, the publication reported that Bachans has hired investment banking advisory firm Centerview Partners to test the market in preparation for a sale. The California-based company produces a line of Japanese-style barbecue sauces and dipping sauces that are available in over 25,000 doors nationwide. Bachans has raised a total of $17 million in funding since its inception in 2019, and was reportedly on track to surpass $100 million in sales this year. The condiment category is ripe with opportunity, especially amidst an increase in home cooking, drawing numerous newcomers in recent months, including Smash Kitchen, Ayo Mayo, and She's the Sauce. It's also become a hot acquisition target with recent deals including Duke's Mayo and Lily's Q Sauces and Rubs.

[00:06:11] Brad Avery: Jack O'Walk is feeling the wrath of the machines and a Florida federal court judge as well. The embattled founder of Bang Energy was threatened with a potential ban on filing documents with the court in his ongoing legal battle with Monster Energy after he submitted AI-ridden filings that cited apparently non-existent court cases. While Monster may now own the company that made Owoc a celebrity in the beverage realm, the two are still fighting, as Monster seeks to enforce a $377 million award it received in its false advertising lawsuit against Owoc and Bang Parent Company Vital Pharmaceuticals. O'Walk is representing himself in the case, and he says it's because he can't afford an attorney. In court documents, he said that he and his wife, Megan O'Walk, are attempting to raise six children and avoid an upcoming foreclosure on their home, while also handling these post-bang legal proceedings on their own. It may also serve as a cautionary tale about the limits of AI. Awok may not be a professional attorney himself, but plenty of lawyers have found themselves in hot water after making similar mistakes, relying on chat GPT or similar programs to produce documents that wound up including quote-unquote hallucinations or more plainly fictional citations. Numerous lawyers have been sanctioned for the error, and the American Bar Association has even issued ethics guidances urging members to proofread any AI-ridden notions they may file for accuracy. So it's hard to look at this case and not feel a little bad for Owoc struggling to file his own court documents and motions in a case that he's representing himself. At the same time, this really does scream to me one of the big mistakes that people make with AI is assuming that it is a genius and an expert on everything, which it is not. It is, at the end of the day, the most simplified version is that it is a, predictive text machine that is very strong, but it is deciding what word sounds the most likely to be coming next. And if it runs into something it doesn't know, it will just make it up, which is what happens with court cases. It does not have an extensive library of every legal case ever. And so when it comes up with a citation for a court case, it might just be making it up. And if you submit that to a court, a judge is not going to be happy with you at all.

[00:08:32] Monica Watrous: And that's why I am able to sleep at night knowing that AI isn't going to take my job just yet. On a lighter note, Graza is going where every other olive oil has gone before, into glass. The brand's infamous squeeze bottles aren't going anywhere, and the launch seems to be a clapback at online commentary that has targeted the unsustainable nature of the brand's plastic bottles. But it has announced plans to launch glass as part of its growing platform of olive oil options. From olive oil to butter, 800 pounds of butter has arrived at the New York State Fairgrounds in Syracuse, signaling the start of construction on the 57th Annual American Dairy Association Northeast Butter Sculpture. Following its 13-day stint at the fair, the butter will return to Western New York, where it will be recycled into renewable energy at Noblehurst Farms, which is a dairy farm. I don't know how butter can be used as renewable energy. It wasn't explained in the press release.

[00:09:38] Brad Avery: I'm gonna eat it.

[00:09:42] Monica Watrous: I went down this rabbit hole looking at previous sculptures from like, you know, 57 years of the fair. And there's some really amazing, super detailed depictions happening there. But on a hot day, I just don't know how how you keep that you keep that sculpture from melting.

[00:10:01] Brad Avery: And we wanted to give a quick shout out in this episode to Kayla Castaneda, the founder of Agua Bonita. She announced on LinkedIn that she is stepping away from the company. And from what I can see, the website's offline, so perhaps the brand itself is also going away. Agua Bonita is a canned agua fresca. It was a former BevNET New Beverage Showdown champion. And though things maybe didn't end in a massive acquisition, I think Kayla deserves full credit for helping to bring the Agua Fresca category, the beverage itself, to the U.S. mainstream. You know, this is a traditional Hispanic beverage, and she, you know, put everything into it. And it was her first, and then Coca-Cola launching an Algo Fresca with Minute Maid. And there's been all these other startup brands that are around today. And I know she's been a real leader in that space that would not look the same today if it wasn't for her. So I just want to say, you know, Whatever happened with the brand, wherever she goes on now, a job well done. She left her mark on this space and we're definitely wishing the best of luck to her and I'm sure she'll be going on to great things.

[00:11:18] Monica Watrous: Absolutely. Kayla is a lovely human and great products as well. Good stuff. Yeah. Delicious. Here are some other notable bits of news from the week. Frozen French fry brand Jesse and Ben's House Cut has secured a seven-figure investment round to support its expanded retail footprint. The campaign to remove unhealthy junk food from Supplemental Nutrition Assistance Program, or SNAP, benefits has claimed further victories as six more states have agreed to ban the purchase of soda and other sugary products with government waivers. And finally, Beyond Meat has announced plans to shrink its North America workforce by 6% to strengthen its balance sheet, marking the company's latest effort to combat years of falling sales and weak demand. For these stories and more, become an insider at BevNET and Nosh. And if you're enjoying the show, please subscribe on your listening platform of choice. That wraps up this edition of CPG Week by BevNET and Nosh. Thank you to our audio engineer, Joshua Pratt, our director is Mike Schneider, and our designer is Aaron Willette. If you enjoyed the podcast, please subscribe on your listening platform of choice, and we will see you next time.