KRAVE Owner Sonoma Brands Buys Chef’s Cut
The premium jerky space just got a little smaller as two competitor join forces. Today incubator and investment firm Sonoma Brands announced the acquisition of premium jerky brand Chef’s Cut. Terms of the deal were not disclosed.
In May the Sonoma, California-based firm re-acquired KRAVE, the meat snacks maker founded by Sonoma Brands founder Jon Sebastiani and sold to The Hershey Company in 2015. Sebastiani believes that adding Chef’s Cut to the firm’s portfolio will, in turn, help KRAVE quickly achieve the scale necessary to see a return on that investment.
“The days of throwing a ton of private equity capital at a brand and losing cash and negative EBITA or challenged margins, those days are over,” Sebastiani said. “We know we need to create efficiencies on the manufacturing side… and the sales and marketing side. Having two large brands together is the greatest first step to make that happen.”
After announcing the purchase of KRAVE and the formation of Double Peak, a holding company created to acquire other jerky brands, Sebastiani said he received calls from multiple “major” premium jerky companies asking about a sale or investment. From start to finish, he added, the Chef’s Cut deal took only three weeks to complete.
Chef’s Cut has previously raised funding from both CAVU Venture Partners and Halen Brands (an investment vehicle of Clearlake Capital). As of 2018, investors reported the company had $47 million in sales.
Sonoma Brands is still evaluating next steps with outgoing Chef’s Cut CEO Bart Adlam. For now, Sonoma Brands’ managing director Kevin Murphy will serve as interim CEO for both brands. Chef’s Cut underwent “significant” layoffs in March as the Covid-19 pandemic began and “funding dried up a bit,” Sebastiani said. To keep the two brands aligned, Sonoma is consolidating roles within the companies: KRAVE CMO Rusty Porter and COO Matt Grebil will serve in those roles for Chef’s Cut as well. The group is still searching for finance and sales leads.
Of the brands that approached Sonoma Brands, Chef’s Cut was most appealing for its size of distribution and lack of duplicative overlap in both channels as well as product mix. Together the two brands wield a much stronger ACV, Sebastiani said, which could lead to better promotional, marketing and distribution strategies. Looking at products, the KRAVE team was particularly interested in Chef’s Cut’s biltong, zero sugar jerky and stick offerings — the later a category KRAVE will likely not enter, Sebastiani said.
By having a larger portfolio, the company will be able to lower costs on everything from shipping efforts to ingredient purchases to, eventually, production. Although biltong, sticks and jerky all use different machinery, the “aspirational” goal is to be vertically integrated either through the acquisition of a factory or a more robust partnership with a manufacturing company, Sebastiani said.
These cost savings will, in turn, allow Chef’s Cut to more strongly compete on pricing and promotion with legacy brands.
Beyond the product offerings themselves, Sebatiani and Porter emphasized that there is a need to create differentiation between premium jerky brands. When KRAVE exited the marketplace, Sebastiani added, it created a wave of jerky brands that sought to emulate the brand’s efforts, but largely watered down the category creating a set that was driven by pricing and promotion.
“The level of differentiation between these premium brands just disappeared,” Sebastiani said. “There’s just been so much of brands fighting with one another,” Porter added.
Moving forward, Chef’s Cut will be positioned as a smaller, easier step up from the conventional brands that dominate shelves at mass, drug, conventional grocery and convenience stores — and a brand that can help drive incremental sales in the category from existing shoppers.
“Chef’s Cut we envision being a more elevated premium jerky consumer,” Sebastiani said “We want to trade those legacy consumers in Links and Slim Jim up the value chain.”
KRAVE, meanwhile, will be positioned as a slightly more premium offering targeting millennial, aspirational wellness consumers, Porter said. That brand also has the flexibility to expand beyond meat snacks, but Sebastiani said that’s likely a “third or fourth” move. Although the two brands may eventually be sold in the same retailers, KRAVE will likely maintain a slightly higher price point on shelf.While it may raise eyebrows for one company to own two close competitors, Sebastiani looks to his his background in the wine industry for inspiration, citing the success global brands Constellation and Diageo have seen creating portfolios that have multiple brands or products in the same categories, but at different price points to target different consumers. Future acquisitions may help round out the portfolio, with Sebastiani noting the company is looking for brands that offer “white space or distribution” that KRAVE and Chef’s Cut don’t already have.
The goal, however, is an eventual exit to a strategic once again. Sebastiani believes that larger buyers are sitting back and waiting to see which brands survive before choosing a horse to bet on.
“We know we’ll be rewarded if we can be effective in consolidating premium [meat snack brands],” Sebastiani said. “Our effort has been to return to incrementality and be sure we are communicating to consumers about the reasons why meat snacks are a better snack then bars or dried fruit. It’s a category play that we need to return to and wave the flag as a category.”