CPG Week Podcast: Unpacking the Acquisitions of Caulipower and Justin’s

[00:00:05] Monica Watrous: Welcome to the CPG Week podcast by BevNET and Nosh. I'm Monica Watrous, here with my co-host, Lukas Southard. Now here is the latest in food and beverage industry news. Caulipower, the brand that popularized pizza crust crafted with cauliflower, has been acquired by its longtime co-manufacturer Urban Farmer, a Payne-Schwartz Partners portfolio company and producer of branded and private label specialty dough products. Urban Farmer specializes in premium frozen pizzas, crusts, and bakery products. The company operates two manufacturing facilities in Illinois. And in addition to partnering with brands, retailers, and restaurant operators across North America, Urban Farmer markets a branded line of gluten-free frozen pizzas on various vegetable crusts that are sold in grocery and natural chains. The combination will create a fully integrated, scaled frozen foods platform. Caulipower will continue to operate under its established brand, benefiting from Urban Farmer's manufacturing capabilities to accelerate new product development, while Urban Farmer is expected to expand its reach to millions of new households and add a strong pipeline of innovation. Founded in 2016, Caulipower offers an assortment of pizza, chicken tenders and bites, pasta, meals, and more, crafted with cauliflower and other vegetables instead of wheat. The products are sold at about 17,000 stores nationwide, including Walmart, Whole Foods Market, Wegmans, and Publix. Caulipower founder Gail Becker will serve on the board of Urban Farmer and will continue to guide the brand's vision as chief brand and innovation officer. Prior to the transaction, Kali Power had raised more than $10.2 million in total funding from backers including BFG Partners, 10th Avenue Holdings, and Continental Grain Company. The business generated 120 million in retail sales for the 52-week period ending March 24th, 2024. And regarding the sale, Gail Becker told us that Kali Power led a very small, limited process with potential partners where, quote, we knew we wouldn't have the most synergies, noting that Urban Farmer quickly emerged as the most logical partner. Last spring, Kali Power brought on Tyler Ricks, a seasoned industry veteran, as chief executive officer to optimize the business, lead a value creation strategy, and explore strategic options for liquidity.

[00:02:35] Lukas Southard: In an update of a separate acquisition, it's been about two and a half months since Keurig Dr. Pepper announced it was acquiring European coffee conglomerate J.D.E. Peet's in an $18 billion deal that would eventually split KDP into two separate businesses, one focused on coffee and one on the rest of the portfolio of beverages. Last week, KDP held a meeting to assuage nervous investors and quail concerns among stakeholders about the deal. The biggest news of the event was that private equity companies Apollo and KKR will be making a $7 billion strategic investment in KDP to help fund the deal. Board Chair and former CEO Bob Gamgord spoke publicly for the first time about the deal. While Gamgore didn't walk back the decision to bring Keurig Green Mountain's coffee business together with the Dr. Pepper Snapple Group in 2018, he did say last week that coffee, quote, requires a very different management mindset. J.D.E. Peet's represented one of the few potentially acquirable coffee companies with the global reach KDP was searching for. J.D. Pete's is profitable, bringing in $11 billion in net sales and nearly $2 billion in adjusted EBITDA, and has a robust portfolio of regional brands across Europe and in Brazil. Once the deal closes, the newly aligned mega-coffee business will focus on driving household penetration, growing premium coffee, scaling cold coffee solutions, and innovating Keurig's at-home brewer systems. As for soft drinks, the KDP's current President of U.S. Refreshment Beverages, Eric Gorley, said that things would remain relatively the same as the beverage business, quote, has a playbook that's working. It will be leaning on its DSD network and will continue to invest in its buy-build partner model, which has lifted up brands like C4 and Bloom, while also leading to the acquisition of Ghost Energy last year.

[00:04:34] Monica Watrous: After nearly a decade under the ownership of Hormel Foods Corporation, Justins is coming back under private ownership, with founder Justin Gold and former CEO Peter Burns returning to the company. Private equity firm Forward Consumer Partners purchased a 51% stake in Justins from Hormel, with the strategic retaining the remaining 49%. Hormel had acquired Justins in 2016 for about $286 million. Burns, who had been working as an investor with Sunrise Strategic Partners, is returning to the CEO role, while Gold will be on the board and working as a strategic advisor. The deal is expected to close by the end of the year, and the cost of the transaction has not yet been disclosed. Matt Leeds, the managing partner of Forward Consumer Partners, will be the new board chair at Justice. Once the transaction closes, the biggest near-term priority is, quote, executing a flawless carve-out from Hormel, according to Brandon Staub, partner at Forward Consumer Partners. Justins is currently, quote, entirely entwined within the broader Hormel infrastructure, including IT systems, financial reporting, and supply chains. Though the process is complex, the forward team is confident that Justins will become a fully independent and truly standalone business in the next six to 12 months. At which point there will no longer be linkages with Hormel across any functional areas. Additionally, Justins will be opening a new headquarters in Boulder, Colorado. Gould will continue in his role as chief innovation officer at Rudy's Rocky Mountain Bakery, which incidentally recently launched a collaboration with Justins on its line of frozen PB&J sandos.

[00:06:16] Lukas Southard: When I talked to Justin last week, it seemed like he wanted to focus a lot of his attention on rebuilding the Justin's brand. He addressed that there were some quality and distribution concerns he wanted to fix as well as he was going to help recapture lost ACV that has been lost since. Justin's has been part of the Hormel portfolio.

[00:06:40] Monica Watrous: We also know that once the transaction closes, Justins will be focused on expanding its portfolio of nut butter and confection products and even, quote, snack factions.

[00:06:53] Lukas Southard: Moving on. Monica, I have one question for you. Have you ever tried to play five sets of competitive tennis fueled solely by ancient grains?

[00:07:02] Monica Watrous: Actually, no, just four sets.

[00:07:05] Lukas Southard: Well, tennis legend Novak Djokovic is a prime example of why you should start. He just became the lead investor and co-founder of corn-free popcorn brand Cobb. The sorghum-based snack brand launched this week on the back of a $5 million seed round investment. Cobb is launching direct-to-consumer with other e-commerce channels like TikTok Shop and Amazon following soon. The brand will have minor retail distribution in specialty grocery stores in the New York market, but is not expecting to make a broader retail push until Q3. The new popcorn brand is differentiating from other celebrity-backed brands like the Jonas Brothers Backstage Popcorn and Khloe Kardashian's Cloud Protein Popcorn by marketing on the health benefits of Cobb's hero ingredient. Sorghum is a resistant starch, so it triggers a GLP response in the gut, giving consumers a more satiated feeling. Cobb is starting with four flavors, Cacio e Pepe, Mediterranean Herb, Olive Oil and Pink Salt, and Seriously Cheesy, and will be available in 24-bag multi-packs in the one-ounce snack portion.

[00:08:18] Monica Watrous: On a lighter note, in conjunction with its 60th anniversary, PepsiCo unveiled a new visual identity to quote, highlight the depth and diversity of its portfolio, which includes over 500 brands. And Lucas, you have some notes.

[00:08:36] Lukas Southard: I don't like it. I don't like it at all. I'm just going to be honest.

[00:08:41] Monica Watrous: Wow, that's a pretty harsh critique. To explain, the company's updated logo features a P, which is a nod to its heritage, shaped by the surrounding symbols that represent the values guiding its future, consumer centricity, sustainability, and great taste. Its color palette draws from the soils that nourish PepsiCo's food and beverage products, and the hues that reflect its commitment to people and the planet.

[00:09:07] Lukas Southard: But I mean, really good copywriting there, but like none of that is is conveyed to me when I look at it. I say go hard, you know, be, you know, take a liquid death approach and be something like in your face or, you know, retro or something like that. It just it feels too nebulous and soft.

[00:09:25] Monica Watrous: Well, maybe this will cheer you up. Kraft Heinz announced this week its newest limited edition Kraft mac and cheese flavor. And it you don't get much more American than this apple pie. According to the brand, it combines creamy cheese with cinnamon and tart green apple notes. And to celebrate the launch, the brand has tapped American Pie star Jason Biggs for its marketing campaign.

[00:09:48] Lukas Southard: There you go. See, that's what you need to do. You know, be in your face about it.

[00:09:53] Monica Watrous: I think if anybody has learned anything from this show, it's that you have a lot of very strong opinions and ideas about marketing strategy.

[00:10:02] Lukas Southard: I have a feeling PepsiCo will not be inviting me to make any comments on their next rebrand.

[00:10:09] Monica Watrous: I don't think they invited you to make comments on this rebrand. Here are some other notable bits of news from the week. Canadian beverage maker Cove Soda has closed on $15 million in new funding as it seeks to further fuel its U.S. expansion. Meat Stick brand Chomps is preparing for continued growth with a new investment partnership that will build more capacity. And finally, packaged salad producer Taylor Farms is expanding its global footprint with the acquisition of Nature's Way Foods, a fresh prepared food manufacturer based in the United Kingdom. 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.