CPG Week: Siete Acquisition, BetterBrand Rumors, and C-Suite Changes

[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 Lukas Southard. If you're enjoying the show, please subscribe on your listening platform of choice. On the podcast today, we're discussing PepsiCo's acquisition of Siete Foods, a rumored shutdown, and leadership changes at top beverage brands. But first, This is kind of disturbing. Do you guys remember that trick or treat, smell your feet chant that like, I guess we all recited as kids?

[00:00:43] Brad Avery: Of course.

[00:00:44] Monica Watrous: Airheads, the candy brand, released Foot Spray as a nod to that little chant. It smells like an Airhead cherry bar.

[00:00:56] Brad Avery: And it's available- Which doesn't actually smell like cherry at all, but you know, okay.

[00:01:00] Monica Watrous: Right. It's available at airheadsfootspray.com for a limited time. And the bottle itself is shaped like a foot. Would you guys spray your feet with the smell of cherry Airheads?

[00:01:14] Lukas Southard: Well, does it smell like cherry or does it smell like NyQuil? That is the number one issue. Anytime someone does a cherry flavor, I think this is the real challenge for a brand when doing a cherry flavor. Does it just taste like NyQuil?

[00:01:28] Brad Avery: Well, maybe we need to get you the foot spray so you can do your sniff test. You can scratch and sniff your feet.

[00:01:37] Monica Watrous: Yeah, I don't know. This just seems like a foot rash waiting to happen.

[00:01:41] Brad Avery: It feels like a weird trick marketing campaign, too. Like, is it really? Are people really going to buy this?

[00:01:50] Monica Watrous: I think I'm going to have to. Well, moving on to less distressing news, PepsiCo last week announced it was acquiring Siete Foods in a transaction valued at $1.2 billion. Siete Foods is a decade-old Mexican-American food brand that has scores of SKUs across the grocery store now. started with almond flour tortillas and has expanded into dairy-free queso dip, enchilada sauce, seasoning packets, all kinds of meal and snack products. The products are all inspired by the heritage of the founding family, the Garza family. Veronica Garza, one of the co-founders, actually started creating products for herself. She has a number of autoimmune conditions and wasn't able to eat grains. but missed the culinary staples of her heritage like tacos and fajitas and so started creating in her kitchen these almond flour based tortillas which quickly became a hit in the local community of Laredo, Texas. They started selling them locally and then I believe around that time advanced into the SKU program, the accelerator in Austin. At the time the company was called Must Be Nutty And I believe their mentors there encouraged them to change the name. And look at them now. They're a huge business and this is a dream acquisition for the founders. Now, a lot of people online are concerned that the company is selling out. By being acquired by a big food company, people are worried that the quality of the products is going to be affected negatively. What do you guys think?

[00:03:35] Lukas Southard: I mean, that's always the concern for consumers and fans of a brand when an acquisition like this happens, right? And you do see it from time to time that a Brandt Gehrs acquired and maybe they stay the same for a while, but eventually changes happen. Now, that's not to say that this is the case here. And we don't know what PepsiCo is going to end up doing with Siete, but I think a big drive for acquiring these Better For You brands is that people want that quality and they want the nutrition that comes with these products. So I don't see a future in which Siete is suddenly filled with unnatural ingredients or anything like that. I don't know why. you would acquire the brand and then completely go against everything that it was designed to be. But, you know, I understand your concerns. I think in the past, you know, I won't name names, but, you know, we've definitely seen brands where they get acquired and then they lose a little something in the process. But, you know, we'll have to wait and see what PepsiCo does. I don't think we can predict the future about this.

[00:04:44] Brad Avery: Going along with that, I would imagine that PepsiCo has some optimistic aspirations for the brand, considering they paid $1.2 billion for it. I mean, that's a, that's a, that's a high price tag. I think it is a value add to PepsiCo's portfolio because it just, as you said, it, it kind of plays into this grain-free trend that has been building and has shown that it's has some staying power in terms of what consumers are looking for in snacks.

[00:05:13] Monica Watrous: For context, Siete Foods had US retail sales in 2023 of $400 million. So the valuation makes sense to me. The brand's products are sold in 40,000 grocery stores, club stores, and natural food stores. And this really gives PepsiCo entry point into some of these natural retailers where it currently doesn't play.

[00:05:41] Lukas Southard: You know, we've been talking for a while now about what the state of M&A is like, and it had been slow for a while, and this is one of the largest single-brand deals that we've seen in quite a while now. Obviously, there was Mars-Kellonova, that's significantly larger, but that's buying an entire portfolio for a single-brand exit at $1.2 billion. That's, I think, a positive sign for the industry and a positive sign that PepsiCo is buying again at that scale. We also just saw on October 5th, Butterfly Equity acquired Duckhorn Portfolio, the wine business, for a valuation of almost $2 billion. So we're seeing some big movement again in CPG, food and beverage. M&A, which is great.

[00:06:31] Monica Watrous: But these deals are bigger, more established, higher check sizes. It seems that the strategics aren't placing big bets on much smaller brands like they were 10 years ago.

[00:06:44] Brad Avery: Interestingly in PepsiCo's third quarter earnings this past week, they didn't really reference the SIETE acquisition yet. CEO and chairman Ramon LaGuardia did say at one point that SIETE hopefully will give us another tool to capture both permissible locations and enter meals in kind of a long-term sustainable form, which goes along with some other things he said during the call referencing how Gen Z eating patterns had shifted into mini meals and snacking occasions, and generally the Gen Z consumer is more interested in these premium type snacking products.

[00:07:27] Monica Watrous: While the PepsiCo-Siete deal signals some good news for the industry, there's a number of challenges plaguing emerging brands that are persisting, and we are seeing that potentially with low-carb breadmaker Better Brand. Lucas, you wrote about this. Can you tell us more?

[00:07:44] Brad Avery: So a better brand who makes better bagels, better buns, and better wine rolls might be experiencing some difficulties. To be clear, we haven't heard directly from the company yet. I did email its founder, Amy Yang, and didn't receive any response. What we do know is that the company seems to be frustrating a number of its customers by not delivering on orders. And some of these customers have been waiting months for their various low carb baked items. Additionally, it appears that the company's website was deactivated for around a week and a half, two weeks. It has since been reactivated. All the while, its Instagram feed has continued to pump out a variety of marketing posts. even when the website was down. And a lot of those posts were filled with replies from customers expressing their frustrations about waiting so long for delayed product. To its defense, the company has started responding to those complaints on Instagram and has said that it has experienced issues with its Shopify website, but the site was back up and it was processing orders as we speak. Now, adding to all this kind of mystery behind the brand or what's happening at Better Brand. Snackshot founder Andrea Hernandez posted a customer email on her Twitter feed that was from Better Brand. In the email, the company proclaimed it was, quote, a small team battling a hostile takeover event by a large number of institutions. Now, subsequently Hernandez posted a separate email that essentially said the same thing, but the hostile takeover bit was removed from that email. So all of this kind of adds to a lot of intrigue about what's going on at Better Brands. Like I said, what we know is it seems like they are having trouble keeping up with production at very least. But there could be some bigger things going on, whether it's a hostile takeover or they're just getting some pushback from investors. We really don't know at this moment.

[00:10:05] Monica Watrous: For context, this is a company that was highly capitalized and very well-hyped right out the gate. It was dubbed at one point the beyond meat of carbs, and it had been valued at $170 million at its peak. Some of its high-profile backers include Emmy Rossum, Patrick Schwarzenegger, Sean Thomas, who is the grandson of Wendy's founder Dave Thomas, as well as Reddit founder Alexis O'Hannon's VC firm 776,

[00:10:35] Brad Avery: You're right, Monica, there was a lot of hype behind this brand and there was a lot of money too. Most recently it raised $6 million, uh, last summer and its founder, Amy Yang was featured in many news stories as kind of like the face of this new era of carb-free lifestyle, maybe. That being said, the brand did kind of move operations, it seems like, from LA to London when Yang moved to London about a year ago, and that seems to be when things started to unravel. Again, we don't know the details of the timeline of things, but it does seem like when the brand moved to London, as it was trying to open up its London business where it had landed a deal with Whole Foods, It seemed to be that's when there was a lot of uncertainty about how the brand was keeping up with all of its growth and still servicing its consumer base.

[00:11:35] Monica Watrous: The brand had scaled into over 2,000 doors across the U.S., including Whole Foods, Sprouts, Target, as well as Thrive Market. This is a brand that's also facing a lot of competition. There have been new entrants in this low carb bread segment, including Equi and Hero, which had massive distribution growth in the past year. So, it's possible that people are trying other brands and maybe preferring those to better brands. Maybe it's a lack of demand rather than operational issues. Who knows, but we will continue to dig into this and find out what's going on. This week on BevNET, we've been covering some leadership changes at top beverage brands. Brad, can you tell us more?

[00:12:26] Lukas Southard: Yes, LP and LD. We've got some big changes coming to both of those brands. First, Lemon Perfect has announced a new CEO. Former Mass Jägermeister U.S. chief executive Jeff Popkin was named last week as the new CEO for Lemon Perfect, taking over from founder Jani Hufnagel. And this is coming at a time where a lot of shift is happening in the brand's C-suite. Yanni is now taking over the role of executive chairman. Meanwhile, their president, chief revenue officer, and board member Jim Brennan, a longtime industry veteran who had worked at Coca-Cola, announced on LinkedIn that he was going to be stepping away from full-time responsibilities. Jim, bear in mind, is looking towards retirement and is looking more to you know, continue to do advisory roles. I believe he's going to be remaining on the board, but just stepping back from the day to day. And meanwhile, they've also just brought in Guy Weaver, a 15-year veteran of Monster Energy, as their new chief sales officer. So Lemon Perfect has been around now for quite some time, founded in 2017. It's an Atlanta-based brand, and they've grown quite significantly. As of July 14th, Circona reported them at over $32.6 million in U.S. retail, it's Mulo and C-Store, up 4.4%. Those are numbers from the summer and don't include every single channel, so we can imagine they're doing a bit more than that. And just two years ago, they had raised a $31 million Series A, they've got Beyonce at the cap table, and lifetime funding's over $42.2 million. Meanwhile, over at Liquid Death, Our Managing Editor at BevNET, Martín Caballero, covered this news as they brought in a new Chief Revenue Officer, Michael Fine. Michael Fine comes to them from Ashok, where he had been running marketing at the Energy Drink brand. Before this, he'd also worked at Nestle Waters North America in body armor. Liquid Death has a lot more movement going on, as this brand has really scaled up. And they announced the promotion of their current senior vice president of strategy, Maritha Berktha, to chief strategy officer. And in June, they named Kareem Siddiquan as CFO. So all this movement in the C-suite is coming as the brand has also done some layoffs for its sales and distribution team. Last week, Beverage Business Insights reported that they'd made some cuts to the staff and the company confirmed it with us. The company said in a statement, now that we are a much larger brand with deeper distributor relationships who invested in the company earlier this year, we needed to restructure our sales and distribution team. that was built for an earlier stage of scale when we had limited retail penetration and were a lower priority for DSD distributors. Like other larger brands, we are now able to lean more on our distributor partners for in-store execution." And mentioned that the laid-off employees will be receiving severance and extended health insurance coverage as well as outplacement services. And if you want to know more about these moves, we wrote about them on BevNET. We have Lemon Perfect names, Jeff Popkin is CEO, founder moves to chairman role, and Liquid Death, new CRO, Michael Fine to lead retail expansion. You can read those stories on BevNET.com.

[00:15:52] Monica Watrous: And here are some other notable bits of news from the week. Retailers want you inside chain sourcing events for emerging brands. Betting on breast milk is Lactoferrin CPG's newest functional ingredient obsession. And former kind exec launches baking mix brand built on guilt-free shortcuts. For these 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.