CPG Week: Orange Juice, Regenerative Rice and Cottage Cheese

[00:00:05] Monica Watrous: Welcome to the CPG Week podcast by BevNET and Nosh, your source for the latest food and beverage industry news. I'm Monica Watrous, Managing Editor of Nosh, here with my co-hosts, Brad Avery and Adrianne DeLuca. If you're enjoying the show, please subscribe on your listening platform of choice. On the podcast today, we're discussing juice, regenerative rice, and recent funding news. But first, let's talk about cottage cheese. When I think of cottage cheese from my youth, it is the watery, gross salad bar topping that my mom used to put on her salads to be healthy. And now it's like the TikTok trend of the decade.

[00:00:48] Brad Avery: I purely think of my grandmother when I think of cottage cheese because she used to eat like chive, a horrible combination of chive, cottage cheese. waffles and maple syrup every morning. And I think that put me off of cottage cheese for my whole life. But after writing about it for the past week, now I'm like, OK, cottage cheese ice cream doesn't sound like a horrible idea. Right? Brad, are you a cottage cheese guy?

[00:01:11] Adrianne DeLuca: No, because I agree. Growing up, you look at it and it just has the visual look of something that says, do not eat this. But I'm also kind of fascinated now only feeling a little late to the party learning that there is a revival happening. So I'm as fascinated as you guys are about what is going on.

[00:01:34] Brad Avery: Adrienne, what have you learned as you've been digging into this topic? I've learned that this trend has really just taken off over the past year and it does not seem to be going anywhere. So good culture really kicked it off. Like I mentioned earlier, they had a viral cottage cheese ice cream recipe. And that seemed to like take off all the influencers' creativity around cottage cheese because now there's recipes around flatbreads, cookies, really you name it. And someone has put cottage cheese into a recipe and dubbed it, you know, a trendy viral ingredient.

[00:02:07] Monica Watrous: I had no idea it was that versatile. And I've seen a lot of TikTok recipes as well, to your point, some savory, some sweet. But was it good culture that really designed and orchestrated all of this? Or how did they come out the clear winner of the cottage cheese revival?

[00:02:23] Brad Avery: So they seem to have one video that went viral last spring. And immediately saw like an outsized boost to their social media. Velocity's kicked up at all key retailers. And since then, according to Spins data, cottage cheese has grown something like, I think it's like 11.9% year over year compared to in 2022 to 2023, unit sales are actually declining. So I would say good culture has really, yeah, won this trend. But it's also bleeding over to legacy brands like Breakstone, which has been around for over 140 years. They're also seeing a huge boost to velocities. They're innovating around the trend. They've got a range of different flavors. They've snacking cottage cheese. They're really embracing it.

[00:03:08] Adrianne DeLuca: It does seem like TikTok has a way of finding sleepy or quote unquote boring categories and suddenly just injecting this life into it. Like I'm thinking about several months ago when I was writing about the whole water talk trend driving old classic powder mixes for drinks to booming sales. Products that aren't even the trendy ones like you know liquid IV but the products of gel cert makes and now gel cert is modernized and are going all in on marketing and innovation and Suddenly they're the hot brand again

[00:03:46] Brad Avery: That's a great point, Brad, because it seems, you know, when there is a consumer need to be met that, you know, TikTok really caters to that because, you know, obviously hydration and water talk go hand in hand, but on the cottage cheese side, you know, through all my research, it's high protein, low sugar, simple ingredients, and you throw in probiotics and everyone seems to be sold on cottage cheese. So when you're hitting, I guess, all of those trends in one, it makes for some TikTok success, at least.

[00:04:13] Monica Watrous: And I think that good culture deserves a lot of credit here, not just for the recent virality of these recipes, but also just Jesse Merrill's vision when he founded the company several years ago and really recognized that the cottage cheese category was ripe for disruption. based on how we were talking about cottage cheese earlier and our perceptions in our childhood of cottage cheese. He recognized that there was an opportunity to modernize this food and has had great success. He really has made cottage cheese cool again, or cool, period. I don't think it was ever cool. Yeah, I think that's accurate. Well, we're excited to read your story, Adrian, on Nosh.com. And moving on, Brad, you spoke with the CEO of Tropicana recently. What did you learn from that conversation?

[00:05:13] Adrianne DeLuca: Yeah, speaking of previously sleepy categories that are looking to modernize and turning to innovation, Tropicana Brands Group is definitely going that route with its orange juice and smoothie portfolio. Now, if you'll remember, about three years ago in 2021, PepsiCo divested Tropicana and Naked to a private equity firm. And since then, the group that owns these brands is really working to get back out there with these brands and make them modern and cool. Last week I spoke with CEO Monica McGurk who said that Tropicana Brands Group is trying to operate more like a $3 billion startup. With Naked they are completely revamping the brand with a reduced sugar product. leveraging the citrus fibers and 50% less sugar in order to push the brand as not just healthy, but also a snack option. And I thought that was one of the interesting things. The smoothies, you usually think of maybe as a meal replacement, a breakfast option, but they're now trying to push it for snacking. And having that lower sugar profile is an important part of that. As far as the core Tropicana product goes, They have several new marketing initiatives. There's the Juice It Starts It All campaign that began this spring. They've partnered with brands like Milk Bar for limited edition products on their menus. And they've enlisted Coco Gauff, the tennis star, as their chief smoothie officer for Naked. So they're going all in on this very modern entrepreneurial brand strategy.

[00:06:58] Monica Watrous: Of course, at the helm, Monica McGurk is a seasoned CPG executive. Can you tell us more about her background?

[00:07:06] Adrianne DeLuca: Yes, so she came into Tropicana in September 2022. She's been CEO of the North America Business Unit since October, but she's also worked at a lot of large CPG firms over the years. Chief Global Growth Officer at Kellogg from 2019 to 2022. She was at Tyson. She was at Koch. She was at McKinsey. Early in her career, she was even at General Mills. So, this is someone who is leading his portfolio, who knows a lot about steering these large ships of these big established brands that are household names. I think what's interesting is with Orange Juice, we saw a big revival in the pandemic as people turned not only to immunity but also to old traditions, their old rituals as they were home again and they decided, I'm going to start buying orange juice and having breakfast every day instead of being on the go. Now, the behavior is shifting a bit again as people are back out in the world. There's opportunity now to seize on that, that renewed love of orange juice. But she was also very clear that orange juice is only a slice of what they're doing. This portfolio is very large and they have lemonades and other products as well. So they're really looking to emphasize all the product categories that they carry.

[00:08:29] Monica Watrous: Insiders can read more about your conversation with Monica McGurk at Tropicana at BevNed.com. Also at BevNET.com as well as Nosh.com. Our insiders can read the first of our exclusive reports in partnership with Fabid. Ryan Williams there has supplied us with some great stats and figures from the latest quarter. A couple of the highlights here. Venture funding decreased by 49% quarter over quarter, driven by fewer late stage investments compared to the first quarter of the year. The number of brands receiving venture funding fell to 51 from 54 in the prior period. That follows a general trend of fewer brands raising venture capital funding. It was the second weakest quarter of the past 10 quarters. And despite smaller deals, bigger brands are getting more money. So there's a deep dive that is available on both websites and folks can check it out there. Speaking of funding, Adrienne, you wrote about Lotus Foods raising some money to expand its capacity for regenerative rice.

[00:09:49] Brad Avery: After 30 years of not taking investment, Lotus Foods raised $22.5 million to expand their network of smallholder farms across Southeast Asia, but also bring that network to new countries. It's a very exciting raise, especially for a regenerative food company. We don't often see numbers that high. I know speaking with quite a few in the past, they've had some difficulties securing investment or even just capital outside of federal grants and loan programs. So definitely some exciting news.

[00:10:23] Monica Watrous: Adrienne, in your story, as you wrote, they were really at a crossroads where they had to decide whether to raise capital and expand or stay the course.

[00:10:31] Brad Avery: Absolutely. They've been working to, I guess, figure out where they're going to go at that crossroads for about the past three years or so. They appointed their first C-suite executive about three years ago, and that's around the same time they began looking to take on investment. So now they have this opportunity to expand the method that they use to grow their rice, which is the system of rice intensification, or SRI. which essentially produces a lot more rice using a lot less inputs, so less water, and it also emits a lot less carbon emissions. So they're looking to bring that method to new farmers in new countries and expand between the base that they've built in Southeast Asia over the past 30 or so years.

[00:11:13] Monica Watrous: Insiders can read more about that deal as well as Lotus Foods future plans. Your story is called Lotus Foods raises $22.5 million to grow more regen rice at Nosh.com. Brad, you wrote about how growth equity investment firm Alliance Consumer Growth closed on its latest fund. Can you tell us more?

[00:11:36] Adrianne DeLuca: Yes. So last week Alliance or ACG announced that it closed a hundred sixty million dollar fund five. So ACG is focused heavily on consumer facing brands that include CPG food and beverage but also on premise concepts. They previously invested in Shake Shack as well as everything from apparel to cosmetics. So this new fund has already been rolling, and it's been used to make two investments so far. One is the InBeauty project. Another is a brand we've talked about a number of times on this show, Momofuku. And they led the Momofuku's $11.5 million raise last year. I was able to catch up with Josh Golden, the co-founder and managing partner of ACG, to learn a little bit more about how they're approaching this fund. He said that the goal is to invest in about seven to nine brands total. These would be new investments, not re-upping and past investments, and they'll keep their standard check size, which is $10 to $40 million. But what was interesting is he said that they do have a renewed focus on food and beverage. After the big inflationary period and the tightening of consumer wallets and grocery, He feels that we're now seeing some more energy behind food and beverage that has them excited. When they first started the firm, he said that food and beverage was kind of the focus, and then they started looking elsewhere as other spaces in consumer goods were booming. That led them to apparel, that led them to cosmetics, and now they're back where they started.

[00:13:06] Monica Watrous: Happy to see that, especially with that sort of depressing fabid report that we just ran about the state of food and beverage funding. What are some of the other portfolio brands under ACG?

[00:13:17] Adrianne DeLuca: Well, some of their exits have included Crave Jerky, Baby Gannix, I mentioned Shake Shack already. They also have an investment currently in athletic brewing. So, yes, you're right, the FABID report does paint a pretty poor picture for the investment landscape. And I don't think that Josh meant that everything's fine, but I think that he was understanding that there are brands right now that are experiencing rapid growth or are on the cusp of rapid growth. It's harder for brands that aren't there. There's certainly a split dynamic. The brands that are booming are booming. The brands that aren't booming aren't booming. It feels a little redundant to frame it that way, but it's true. So as far as where growth is coming from, One occasion that is definitely driving expansion is snacking. And Josh was telling me about how a Fund 3 investment for them, Clio, the Greek yogurt bar brand, is doing quite well. So that's an example of a trend that is benefiting. I think we're also seeing entrepreneurial brands do well there. We noted in the recent PepsiCo earnings that some of their snacking is down. These mainstream brands are having a little bit of a tough time at the moment, but some of these rising emerging entrepreneurial brands are attracting consumers and gaining placement.

[00:14:41] Monica Watrous: Insiders can read more in your story, Alliance Consumer Growth Closes $160 Million Fund V at BevNET.com and Nosh.com. Here are some other notable bits of news from the week. Big moves for Lil Bucks, new chief operating officer and expanded distribution. Star power, how influencer and celebrity brands are faring in a saturated spirits market. And surviving the store brand tsunami. For those stories and more, become an insider at BevNET and Nosh. 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.