BFG Continues “Patient” Approach With Fund III Launch

Keeping with its “every five years” timeline, better-for-you CPG investment firm Boulder Food Group (BFG) Partners, which counts brands like Olipop and Mid-Day Squares in its portfolio, is launching its third fund, targeting a $125 million pot.

The fund has already raised about 70% of its goal (about $87 million), and will center on seed- to series B-stage companies with typical check sizes of between $3 million and $5 million, said managing partner Dayton Miller.

BFG operates at its best when it can be one of the first institutional investors into a business in the early stage where “there’s a lot of action that happens,” Miller added. BFG’s portfolio strategy is centered around a rough schedule of five years to invest the fund’s pool of capital and another five years of possible follow-on investments.

The firm has incrementally increased its fund size: its $54 million Fund I launched in 2014, followed by $108 million in its 2019 Fund II.

Founded by former Bear Naked COO Tom Spier, the firm’s strategy has been “very patient and very methodical” in its placement of capital, Miller said. “Hopefully, we’re not too influenced by the winds of any given day.”

Pulling from their collective experience leading CPG companies, Spier and Miller – former CEO of Function beverages – “have a real appreciation for how hard it is” for founders and “empathy” for brands.

After sticking to consumables in Fund I, BFG took a step into personal care products in Fund II, where it saw a lot of deal flow happening. The firm wanted to explore the synergy between natural channel consumers of food and beverage brands and certain sectors of personal care products. With successful exits from hair care company Curlsmith to Helen of Troy and skincare maker ZitSticka to Heyday, Miller said BFG feels it has “earned the right” to continue to invest in the sector.

Yet, the investment group is still heavily focused on environmentally friendly and better-for-you food and beverage products.

In the last fund, BFG invested in rising CPG brands like Graza, Mid-Day Squares and Oats Overnight. The investment group has also made notable investments in Caulipower, MALK, Barnana, Bobo’s and Olipop. BFG has successfully exited food and beverage investments from Chameleon Cold Brew, with its sale to Nestlé in 2017 (later sold to SYSTM Foods) and, in 2020, Sovos Brands’ acquisition of Birch Benders (which changed hands again to Hometown Foods three years later).

BFG has taken a board seat in about half of the companies in its portfolio. Miller said BFG’s approach to consulting and advising its invested companies isn’t a “one-size-fits-all” approach, noting that “informal relationships” with founders can be “just as influential” as board seats.

Seeing as the investment climate has been particularly uncertain in the last year, BFG will be using a healthy amount of caution when preparing to deploy the new capital.

Where is the firm looking for its next big break?

BFG invested in Olipop in Fund II and is confident there will be more opportunity for products positioned around gut health. The subcategory continues to draw attention from consumers, producers and investors alike, especially, when paired with the intersection of GLP-1 drugs and CPG, Miller said.

Another possible opportunity for capital deployment could be brands that claim to improve brain health and provide mental clarity. Though BFG has not disclosed any investments for Fund III yet, it has been tracking the upward trend towards more food and beverage brands positioning around supporting cognitive health with low-sugar and fitness-oriented products.

Miller is especially interested in the link between “not only physical well being but also emotional well being and food.”

The strategy continues down the path laid by its previous interest and growth capital to primarily DTC brands MUD/WTR or Athletic Greens which have leaned into how reducing brain fog and glucose spikes can impact health and performance.