Top NOSH Stories of 2022: Legal and Regulatory Battles Ramp Up Alongside Investments and Acquisitions

Despite the rocky economic climate and high inflationary environment this past year, brands continued to push onward, securing large checks and closing a few notable acquisitions across the natural foods space. While 2021 was all about post-pandemic recovery, 2022 saw companies strategizing for long term growth and positioning themselves to navigate the unforeseen bumps and blunders ahead. However, a few brands are entering the new year with challenges already on the horizon as they grapple with a range of legal disputes and regulatory battles.

1. Don Lee Alleges “Something Is Really Wrong At Beyond Meat”

Beyond Meat was hit with a secondary lawsuit in June from its former co-manufacturing partner Don Lee Farms, claiming the California-based plant-based food tech giant has a tendency to “overpromise and underdeliver, then scramble for excuses.” Don Lee originally sued Beyond Meat for wrongful contract termination in 2018.

This recent suit alleged that Beyond Meat misleads consumers with “unsupported marketing claims,” touts inaccurate nutrition labels that violate FDA regulation and creates unfair marketplace competition. The complaint also cited a range of underlying issues with the company stemming from CEO Ethan Brown, who is described in the complaint as having “an appetite for excuses.”

While the case reached a settlement in October, it also spurred a slew of class action lawsuits around the misleading claims and nutritional information. Many of those cases are still pending.

The filing also came only two months after Beyond settled a derivative suit from its original dispute with Don Lee in April, this time brought by a group of Beyond’s investors. The complaint claimed Beyond’s management team “breached their fiduciary duties” and altered and excluded safety information from food reports submitted to Don Lee and did not sufficiently disclose the state of the case prior to taking the company public in 2019. Investors claimed media reports about the ongoing Don Lee controversy in the months following Beyond’s IPO caused share prices to drop.

2. Once Upon a Farm Raises $52M, Nears $100M Run Rate & Profitability

Children’s fresh food brand Once Upon a Farm (OUAF) announced in March it raised an additional $52 million in funding. CEO John Foraker said that the capital should carry the brand through to profitability, and allow it to aggressively pursue innovation and customer acquisition.

“[This funding] is basically to support growth over the next three to five years and to put us in a position where we’ve got a really big war chest to be opportunistic, both to go after growth opportunities, and to expand the business in places where we see significant opportunity,” Foraker said.

The round was led by CAVU Venture Partners with participation from S2G Ventures, Beechwood Capital and Cambridge SPG and backed by existing investors. In total, OUAF has raised roughly $100 million since its inception in 2015. Foraker said that the round may be its final raise. The company is not yet profitable, which Foraker attributed to its decision to heavily reinvest capital into the business rather than any business challenges.

3. FDA Sends Warning Letters to CBD Food and Beverage Companies

The U.S. Food and Drug Administration (FDA) cracked down on CBD in food and beverage in November, sending warning letters to five companies selling CBD-infused products.

In a statement published online, the FDA said letters were sent to Mood33 manufacturer 11-11-11 Brands; candy and coffee maker Naturally Infused, LLC; CBDfx parent company Newhere Inc.; gummy and candy brand Infusionz; and beverage, snack and pet treats producer CBD American Shaman.

The letter pointed to potential consumer confusion around these products, stating that these companies were selling CBD containing products that could be confused for non-CBD foods or beverages. The agency also cited potential safety concerns around long term consumption of CBD, including harm to the male reproductive system and possible liver damage, as well as negative interactions with certain medications.

The statement added that the FDA “has not found adequate information showing how much CBD can be consumed, and for how long, before causing harm. This is particularly true for vulnerable populations like children and those who are pregnant.”

4. Bachan’s Raises $13M, Will Hit Profitability This Year

Japanese barbecue sauce brand Bachan’s announced it raised $13 million in September, impressing investors with its plans to hit over $30 million in revenue by the end of 2022. Gill plans to use the capital to grow the company’s 16 person team as well as support new accounts.

The round was led by investment firm Sonoma Brands Capital, which was founded by KRAVE jerky founder Jon Sebastiani. The round also saw participation from existing investors Prelude Growth Partners and New Fare Partners, along with RVCA founder and president Pat Tenore and filmmaker Destin Daniel Cretton.

“[In 2021] we took the approach of raising less, growing the brand, protecting shareholder value, and then racing down the road when we built more value,” said, Justin Gill, Bachan founder and CEO, “Then 2022, we essentially wanted to raise what we felt could get us to profitability and turn us into a self-sustaining organization”

5. Popchips Sold to From the Ground Up Parent Company

Powered by Real Food From the Ground Up acquired Velocity Snack Brands Opco, LLC (VSB), the owners of puffed chip company Popchips in December.

Entrepreneurs Keith Belling and Patrick Turpin founded Popchips in 2007, a year later selling a reported 30% stake in the company to venture firm TSG for $25 million. Belgian private equity firm Verlinvest went on to purchase the majority of the company, including TSG’s shares, in 2012.

At the time of the acquisition by VSB, Popchips was reportedly struggling with distribution and manufacturing issues, both impacting sales. Popchips also faced a limited pool of publicly traded strategic acquirers.

6. Mid-Day Squares Raises $10 Million To Bring In “Million Dollar Management Team”

After raising $10 million in March, functional chocolate bar maker Mid-day Squares quickly put its new capital to work, bringing on a slate of industry vets to its executive team, breaking ground on a new U.S. production facility and revealing its fourth SKU – Cookie Dough – which launched this fall.

According to Mid-Day Squares co-founder and co-CEO, Nick Saltarelli, all five new hires to Mid-Day Squares’ “million dollar management team,” were required to have experience scaling a brand from $10 million to $100 million in revenue. These additions include Vanessa Palumbo, formerly CFO and VP of Finance for Sysco’s Quebec region, as CFO; Mike Scavuzzo, who has held executive level sales roles at RX bar and Clio Snacks, as VP of Sales; Kevin Pocklington, who comes from Quaker Oats and Frito Lays, as VP of Operations; Corrie Higgins, previously of Flow Water, as Director of Canada; and Lea Chaussee, from Bel Group, as Director of HR.

“This funding will bring us through about $35 million in revenue and actually bring the company’s destiny, in our control,” said Saltarelli. “This should be the last fundraise that we need to do, versus [one that we] want to do.”

7. RightRice Sold to The Planting Hope Company

In January, plant-based food and beverage company The Planting Hope Company acquired Betterer Foods, producer of legume-based rice alternative RightRice, for $7 million.

The deal includes RightRice’s inventory, key contracts and brands, as well as other intellectual property that Planting Hope “expects to integrate into its business,” according to a press release. The purchase price includes $4 million in cash at the closing as well as two unsecured promissory notes with an interest rate of 5%. The initial note matures March 31, 2022 with the second maturing January 14, 2023.

8. Acid League Raises $6M, Launches Refrigerated Dressings As Part of ‘Third Wave Pantry’ Push

After launching 15 new products into Whole Foods throughout the winter, condiment and beverage brand Acid League announced it has closed a $6.2 million funding round in March. The new capital will support expansion into new product categories and reinforce manufacturing and marketing efforts.

The round was led by existing investors InvestEco Capital and BrandProject, with new firm Springdale Ventures and several family offices also taking part. In total, the company has raised roughly $11.5 million since launching in 2020, reporting revenues north of $10 million.

The company also moved to a new 40,000 square foot production facility in Guelph, Ontario and at the time of the announcement, planned to hire additional team members to support the plant’s day-to-day operations.

9. Former NFL Player Sued For Promoting Nestlé’s Plant-based Protein Brand

The Texas Beef Council filed a lawsuit against former NFL-player-turned-celebrity-chef Eddie Jackson in Texas Southern District Court in February, accusing him of a breach of contract after Jackson announced a partnership with Nestle’s Sweet Earth brand to promote its plant-based Chik’n products. Jackson has been a partner of Beef Loving Texans, the consumer-facing brand of the Texas Beef Council, since 2020 and also serves as the brand’s Chief Recipe Office.

Jackson’s partnership with Beef Loving Texans was intended to increase the demand for beef and maintain its position as “the world’s most preferred and trusted protein,” the complaint states. Jackson, who also hosts multiple cooking shows on the Food Network, was tasked with developing beef-centric recipes with his initial partner.

10. Cleveland Kitchen Details $19M Investment, Acquisition & New Product Launches

Fermented foods company Cleveland Kitchen announced in June it raised $19 million in addition to completing the acquisition of Sonoma Brinery. The deals will allow the company to more aggressively pursue expansion into new products and manufacturing capabilities. The funding, which brings Cleveland Kitchen’s total capital raised to roughly $24 million, will be used to expand the company’s R&D, manufacturing, marketing, sales and hiring efforts.

Both deals were completed in February. The raise was co-led by Amberstone, a venture firm focused on the CPG space, along with Korea-based CJ Group, the world’s leading producer of kimchi. Existing investors Clover Vitality and Cabbage Inc, which is one of the country’s largest cabbage grower, also took part. In February, Cleveland Kitchen also acquired Healdsburg, California-based pickle and sauerkraut producer Sonoma Brinery, which sells its products in roughly 1,500 stores.