CPG Week Podcast: A Corporate Curveball And Combat-Ready Protein Bars

[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. If you're enjoying the show, please subscribe on your listening platform of choice. Now here is the latest in food and beverage industry news. A few days before Valentine's Day, it seems Kraft Heinz has had a change of heart and will pause its efforts to break up. The packaged food giant first shared plans to split into two publicly traded companies in September, driven by lagging sales and volume declines. The proposed move would undo the decade-old $46 billion merger that combined Kraft's grocery business with Heinz's sauce and spreads platform. In an earnings call last week, newly appointed Chief Executive Steve Calhoun cited challenging headwinds, including worsening consumer sentiment and geopolitical volatility. He told analysts and investors on the call that he understands the industrial logic of separation, but said he sees a significant opportunity to fix the business in the short term and turn it into a, quote, more positive trajectory. Kraft Heinz now plans to invest $600 million in the turnaround of its U.S. business. The money will go toward marketing, sales, research and development, and product superiority and price, according to Calhoun. He noted that Kraft Heinz has historically under-invested in brands, creating a gap in innovation that has caused the company to fall behind its competitors. analysts at Jefferies said that they applaud the reset, but lack visibility on the effectiveness.

[00:01:44] Brad Avery: Wait, wait, we can fix it. Going off of what the analysts said at Jefferies, it does make sense that This is a drastic move that probably isn't necessary if they can just instead invest into innovation. They've been falling behind when you look at, say, Kraft Mac and Cheese and the way that they've been struggling on the innovation when compared to next-gen brands like Goodall's coming in. they're just willing to start putting in legwork to get the portfolio up to snuff. And maybe that means divesting some brands the way we've seen other companies doing when certain brands don't make sense. But it certainly is a better approach, I think, than a very risky split, because we've seen how some of those splits have been going with, say, Kellogg.

[00:02:36] Monica Watrous: It seems like the Kellogg split was a success when you look at what happened to the two respective businesses, Kellanova being acquired by Mars Inc. and W.K. Kellogg, the cereal business, being acquired by Ferrero Group. Both companies have now been taken private and I think they're in pretty good operational hands if you look at the synergies across the respective portfolios. So who knows what will happen to Kraft Heinz now and whether the split might actually take place. But certainly this is another example of big food companies looking at their portfolios and trying to figure out what makes sense and how to keep pace with emerging and challenger brands that are entering their categories where they have legacy businesses.

[00:03:24] Brad Avery: Well said. Well, we have some news about your favorite, Monica. Patrick Mahomes-backed. Yes. Go Chiefs. Well, Patrick Mahomes-backed Throne Sport Coffee is making a big play for DSD this year. The brand announced Tuesday it has raised $10 million and is now partnering with New York DSD distributor Big Geyser to grow the business in the NYC metro area. Geyser is going to be the spearhead of a larger push for direct store distribution for Throne, with more than 12 partners expected to come online by the summer and projections that the brand will go from just around 7,000 doors today to over 20,000 outlets nationwide sometime around July. Founder and CEO Michael Fidelity told me that they also intend to start activating more with their athlete partners, including, but not limited to Mahomes. They've built a lot in the Midwest. And so this is a much bigger expansion for the coasts and hitting those larger markets where there'll be helped by names like NBA trainer, Chris Brickley and Peloton instructor, Alex St among others on the roster.

[00:04:30] Monica Watrous: probably a good idea to diversify their sports ambassadors given Mahomes may be out for the near future with that tour in ACL.

[00:04:39] Brad Avery: Certainly, and I think we could turn this into sports talk easily. That's the only sports knowledge I have. Yeah, that and who Travis Kelsey's getting married to. Throne's an interesting product though, and I did talk to Michael Fideli about education and the fact that this is a very unique product. It's a hydrating coffee. It has more of an original flavor profile than other coffee drinks. And he acknowledged it, yeah, getting trial, getting those ambassadors to promote the brand, tell consumers what it is, is going to be vital. And with a partner like Geyser in New York, who are known for brand building from the independent stage, you know, they service all the bodegas, they service on-premise accounts. This is a huge step forward. You know, Michael Fidelity, he was head of marketing at Body Armor. You know, he has experience here. He's brought on some former Body Armor personnel to help lead the business. And I think this is certainly going for that repeat, you know, Super Bowl win.

[00:05:47] Monica Watrous: From the football field to the octagon, Food Story Brands, the producer of Fresh Cravings, Refrigerated Dips, and the namesake Cowboy Cuisine line for hit TV show Yellowstone, among other products, is bringing a new type of muscle to its portfolio. Last week, Food Story announced it will fight its way into the crowded protein bar category through a new strategic partnership with UFC, the global mixed martial arts organization. While product details remain scarce, the organizations said they will develop and launch a quote, high performance, nutritionist backed protein bar under a new, exciting and compelling brand that will be announced later this year. The partnership was brokered by IMG Licensing. The bar will be developed with insights from UFC Performance Institute, which conducts training for combat sports performance, research, rehabilitation, and nutrition. By bringing Food Story into the fold, UFC believes it will be able to apply its research to the food processor's expertise in scaling disruptive, high-quality food brands. The research-driven high-protein bar will contain targeted functional ingredients, the organizations said, and be designed to meet the demands of UFC athletes as well as performance-minded consumers. Food Story has scaled Fresh Cravings into a $100 million brand and in 2023 developed the Yellowstone licensing program with products that have generated $100 million in sales according to the company. Food Story also operates deli snack brand Uppercut and Gen Z oriented frozen snacks and apps brand Mad Genius.

[00:07:27] Brad Avery: They should call the UFC bars Uppercut.

[00:07:29] Monica Watrous: Well, it's taken.

[00:07:32] Brad Avery: Accelerator Active Energy, the better-for-you brand founded by serial entrepreneur Lance Collins, is getting ready for a fresh charge as an independent brand this year. Last week, I spoke to Lance and wrote about the brand's new approach to the market on BevNET. Since splitting with its former business partner Keurig Dr. Pepper last year, day-to-day operations are being helmed by CEO Andrew Wilkinson, and Accelerator Active now looking to build off of the footprint of Lance Collins brand, Hydration Drink Recover 180. The plan is to onboard DSD trucks and open up new omni-channel accounts as it seeks a foothold in the crowded energy drink set. Accelerator Active as a subset of brand Ashock. Ashock debuted in 2019, a collaboration between Collins and KDP. But as KDP took in competing energy brands like C4 and later Ghost to its portfolio, Accelerator Active struggle to get the attention it needed. Now, it's the full focus. And so Collins said he believes the brand could quickly scale to over 50,000 doors this year, which includes conventional retailers like Kroger. And as I mentioned earlier, Travis Kelsey is invested.

[00:08:44] Monica Watrous: We've had a lot of news surrounding performance oriented food and beverage products. It's the craze. We could all use a little help in our athletic pursuits.

[00:08:55] Brad Avery: We have been going a long time on the performance energy drinks though. I mean, Accelerator Active's original form, Ashock, was sort of an answer to Bang. You know, Bang really helped establish that space. And we've seen Celsius, C4, Ghost, Alani all explode in the market over the past few years. But this is certainly a subset of the category that's coming on a decade and having its moment.

[00:09:22] Monica Watrous: Here are some other notable bits of news from the week. After nearly 40 years off the market, legacy Canadian mineral water brand Formosa Springs is returning, relaunching this year under the ownership of Flow Water founder Nicholas Richenbach. Jimmy Bar has seen early massive success of its creatine bars, representing an inflection point for the 12-year-old company. And finally, Primal Kitchen has launched its first ever dairy-based offerings, a line of shelf-stable, creamy salad dressings made with buttermilk from grass-fed cows, Romano cheese, and yogurt. For these stories and more, become an insider at BebNet 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.