Smart Money: SmartSweets Sells to TPG, Brings on New CEO

In an impressive fast-growth story, insurgent low-sugar candy brand SmartSweets has sold a majority share to TPG Growth Fund. As part of the $360 million deal, founder Tara Bosch will step aside as CEO, with Douglas MacFarlane, former CEO of Voortman Bakery, moving into the role.

According to Bosch, SmartSweets has more than doubled its sales over the last year; its line of gummies and chews sold in 25,000 stores across the US and Canada including GNC, Target, Kroger, Walmart, Whole Foods Market and Vitamin Shoppe. Sources pegged its trailing 12-month sales at $100 million. Bosch said the company has been profitable for the past two years.

The four year-old company previously raised $3 million in 2018, from investors including Scott Elaine Case, former managing director of VMG Partners; Terry Tierney, former CEO of Daiya Foods and Eric Patel, former board chair of Daiya Foods, but largely financed its growth through debt financing, Bosch said. Moving forward, she will remain as the single largest individual shareholder and retain her position on the board of directors.

Bosch said that it became apparent that a sale was in the company’s best interests in order to allow the brand to continue on its rapid upward trajectory.

“From day one the vision I’ve always had is to be the global leader in revolutionizing candy, Bosch said. “It really felt like the right time for a meaningful growth partner in order to have the rocket fuel to really put behind our mission to kick sugar and really amplify it in an accelerated pace with more resources than we’ve ever had before.”

TPG was selected from a variety of offers because of the firm’s “strong chemistry” with her team, Bosch said, with the group’s focus on “representation and inclusivity” being of particular focus for the formerly woman-owned brand. SmartSweets was represented by Piper Sandler & Co.

When Bosch started the brand in 2016, the confection category was predominantly composed of large incumbents who had been in the space for decades. However, since then, other players have emerged, particularly within the low-sugar space, including Project 7, Smashgummy, Lily’s and Little Secrets. Bosch said she has always felt it wasn’t a matter of “if” but rather “when” competition would come, but the investment from TPG will go towards helping maintain its category leadership.

The brand has focused on non-chocolate confections up until now, but Bosch isn’t ruling chocolate offerings out just yet, telling NOSH the goal is to ultimately “revolutionize” candy in “every sense of the word,” creating lower-sugar options for every mainstream consumer favorite.

But it won’t be Bosch alone steering the ship, and the company’s portfolio, anymore. MacFarland was the CEO of Voortman Bakery, where he rebranded and reformulated the cookie line, including building out the company’s sugar-free line, before the company sold to Hostess last year for $320 million. MacFarlane was previously the general manager of the Clorox Company and president of the bakery division at Maple Leaf Foods.

Bosch will transition to the role of founder, focusing the bulk of her attention on innovation and community building. Like the sale, she said, the appointment of an experienced CEO was another inevitable step for the brand.

“One of the main filters I ask myself is ‘how I can best serve the mission and the squad in this chapter of the company’,” Bosch said. “In asking myself that question, Douglas joining the [company] is really going to allow me to focus on where I feel I can serve best.”

MacFarlane joins the brand as it works to fully transition its product line over to a new formulation, one that has been the subject of consumer reviews and questions online, that relies on allulose as its sweetener. Currently the brand runs two versions of its products, one with allulose that is sold in the bulk of its U.S. retail accounts and another without allulose that is sold in Whole Foods and Canada, both of which do not currently permit the ingredient in food items.

Though SmartSweets’ initial rabid consumer base was largely built from the keto community, Bosch said that the company’s focus on low-sugar can stand the test of time even if keto fades as a popular diet trend, as long as it maintains a focus on taste.

“I think low sugar and taste is king need to come together in order to have sustainable innovation that really resonates, Bosch said. “So that’s what we focus on: creating radically better choices for the candy people love.”