CPG Week Podcast: Musings On M&A Deals

[00:00:05] Monica Watrous: Welcome to CPG Week by BevNET and Nosh, the podcast that dives deep into the news of the food and beverage industry. I'm Monica Watrous, Managing Editor of Nosh, here with my co-hosts, Brad Avery and Lukas Southard. If you're enjoying the show, please subscribe on your listening platform of choice. Hey, Brad, what are you planning on snacking on during the Super Bowl this weekend?

[00:00:28] Brad Avery: I have a friend, I'm going to his house and he makes pulled pork and a buffalo chicken dip and all other sorts of, he's from North Carolina. So, you know, we're up in Boston, so it's a chance to sort of get some Southern cooking style. So he has a sort of the authentic barbecue approach.

[00:00:46] Monica Watrous: Amazing. Lukas, what about you?

[00:00:47] Lukas Southard: I have a bunch of wings that I've had in my freezer for a long time. I'm going to attempt to make wings at home, which I haven't done in a while, which is always, you know, messy. What's your secret recipe? My secret recipe is fry the wings, and then I have a award-winning wing sauce that I bought at a winter farmer's market. So I'm excited to try that. And I'm going to slather my wings up and probably eat alone, because I can't imagine my wife really cares about staying up for the Super Bowl.

[00:01:20] Brad Avery: The image here is Lukas by himself in front of the TV just eating. I'm imagining a massive plate of wings here. I'm going to imagine enough wings for eight people and then Lukas just one by one.

[00:01:33] Lukas Southard: Yes. There's probably going to be 20 wings, I would say. I usually watch most sports by myself in a dark room. Usually it's my beloved Golden State Warriors basketball, but in this case, I'll try to enjoy watching the 49ers probably get beat again in the Super Bowl by the Chiefs. Thank you very much, Monica.

[00:01:54] Brad Avery: This image in my mind is just scored to, all around me are familiar faces. It's just you're really painting an image of excitement, Lukas, for your Super Bowl night. It might start that way.

[00:02:06] Lukas Southard: By the end, the soundtrack will be some Metallica or some sort of death metal to really just get the anger out.

[00:02:15] Monica Watrous: Basically, you're describing a typical Sunday night for you, Lukas. The reason I ask, the reason I bring up snacks is that Super Bowl is the snackiest time of year, according to Snack International, that's S-N-A-C International, who commissioned some data from Surkana and found that savory snack food sales jumped to $796 million during Super Bowl week last year. We're expecting to see a lot of snacks on a lot of spreads. As for me, I'll be snacking on what's called a ham sandwich, which is a special at my local bar that involves a shot of whiskey, a shot of pickle juice, and a ham's beer.

[00:02:55] Brad Avery: This is a deep pun.

[00:02:57] Monica Watrous: No pigs were harmed in the making of this ham sandwich. Okay, but we've got brisket, we got wings, we got hams. And so why don't we go ahead and get into the meat of the show for today? We're talking about M&A and all of the recent news we're seeing around deal building, platform expansion, and a lot of activity already this year. So Lukas, why don't you give us a lay of the land?

[00:03:23] Lukas Southard: So you bring up M&A deals and it reminds me of the story that I wrote a couple of weeks ago called where the M&A deal winds are blowing for 2024, which was based on a report from Solomon Partners, an investment firm. And they were basically putting their finger in the wind about where M&A might be going this year as it compares to last year. Now, obviously last year there was some headwinds to keep the wind metaphor going. There was high inflation and the capital markets were a lot tighter for. Brands seeking new investment or seeking an exit. Now we did see some big deals go down. The Campbell's acquisition of Solos brands comes to mind. There was also the Chobani deal that we saw in December. So it wasn't that there wasn't MNA going on last year. It was just a little tighter than what we had come to expect, especially during the pandemic when capital was. a little easier to come by. So moving into this year, as inflation seems to be moderating a bit, the general consensus from Solomon Partners was, we're going to see more deals come out. And we've already seen this at the beginning of the year with a slew of smaller deals that seem to be showing that there is more of an appetite for M&A going into 2024.

[00:04:49] Monica Watrous: Brad, you recently wrote about Day Day Cook and their aspirations to be the general mills of Asian food in some of the M&A activity they're exploring. Can you tell us more about that?

[00:04:59] Brad Avery: Yeah, and that article is also on Nosh.com. Just as you said, Day Day Cook wants to become the general mills for Asian food. So Day Day Cook is a Hong Kong based CPG company. They started as sort of a recipe website and have built out into a multi-brand platform with an international presence, including Asia, the U.S. and Europe. Now, let's focus on the U.S. They last year bought two entrepreneurial Asian food brands, Nona Lim and in December, Yai's Thai. This move is based around a pretty ambitious growth plan for the U.S. and they are not done with M&A. They went public with an IPO in the fall and I spoke with Norma Chu, the CEO and founder, and she said, we are hungry for more. So, they are looking specifically for those next-gen Asian-American food brands that they can build out and have a portfolio of different brands all under the Day-Day Cook umbrella, hence the General Mills comparison.

[00:06:03] Monica Watrous: Yes, and we're seeing another example of a platform that's being built out through M&A. Our colleague Adrianne DeLuca wrote an article for Nosh.com this week called The Caveman Evolves, Moosehead Brands and Beanfield Aim to Reignite Paleo in CPG. And the leaders of Moosehead brands intend to build out a platform to support, quote, great brands that may have struggled due to the current investment climate. So currently the portfolio includes Caveman Foods and now Beanfields, the bean-based tortilla chip brand. After Moosehead recently formed a licensing partnership with Canadian parent company, Boosh, to produce and sell the products, Moosehead also has a mental performance supplement brand called NeuroGo that has yet to reach the market. It'll be interesting to see how these platforms expand and what adjacent categories they're seeking deals in going forward.

[00:06:54] Lukas Southard: Speaking of Beanfields, the former CEO of Beanfields, Arnulfo Ventura, who left that company and has been running AlterEco since 2022, also recently departed as AlterEco got acquired by an actual new player in the CPG food industry, It's an investment vehicle called Trek One, and they're based out of Texas, and surprisingly enough, this is their first food or beverage-oriented acquisition, and they're actually based in the oil and gas industry, which seems kind of strange to me, but I guess it's just a way of diversifying their portfolio. When I talked to the operating partner of Trek One, he talked about how they wanted to kind of boost Alter Ecos footprint in more conventional grocery stores and retailers because it's been kind of secluded in the natural channel. So it'll be interesting to watch how they tend to do that considering they don't have a ton of experience working in food and beverage at this point.

[00:08:03] Brad Avery: January turned out to be a pretty busy month for M&A. Adrian also covered two other deals in a single roundup, a deal dive piece on Our Home, which was formerly powered by From the Ground Up, bought a few brands from Utz, and Tessamaze, which had filed for bankruptcy recently, was acquired by Panos Brands. Now, these two deals, again, you can read about them on Nosh.com, Deal Dive, Our Home Buys from Utz, and Tessa Mays Acquired. They're different types of deals. With Our Home, their portfolio includes From the Ground Up, Popchips, and some other brands, and now they're building out their snacking line, having bought from the legacy snack producer, Utz. They have the R.W. Garcia brand now, and the Good Health brand. And they've also taken two manufacturing facilities and controlled the lease on us as Las Vegas production plants. So there's big moves here. I mean, us is a, you know, over a hundred year old company, but I believe they are still going to be in control of their namesake brand. However, selling those manufacturing plants alongside a couple of their secondary portfolio brands. is an interesting move. The deal was valued at $182.5 million, and a lot of that is going to be going towards helping us reduce long-term debt. Meanwhile, you have Tessames, the dressing brand, which had been bankrupt and now is acquired by Panos Brands, which is the parent company of Walden Farms, Chatfields, and Meadell Cookies. And that's a different type of deal. That's buying a brand that was in Chapter 11, distressed, and now we'll see if there's a second lease on life for Tessa Mays.

[00:09:50] Monica Watrous: It's certainly been a busy start to the year as far as M&A deals go. And our editor in chief, Jeffrey Klineman, has been deep down a research rabbit hole. He shared some insights with us for what we should expect for the year ahead. So let's start with some good news. After a challenging fundraising climate, it looks like money might start flowing back into funds from willing investors. So instead Nosh Managing partners going out and trying to find money, they can start having more meaningful conversations around where to put that money. The second point, as the example that you shared, Lukas, Trek One Capital entering the market with the acquisition of Alter Eco might be an interesting thing to watch moving forward. As in the past, we've seen these quote unquote tourist funds retreating from consumer packaged goods market. And now seeing one enter the space could be an interesting bellwether. And the third point, let's keep our eyes on the strategics who ultimately determine the climate. That wraps up this edition of CPG Week by Bevhna 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.