The Specialty Egg Space Is Consolidating, But Bird Flu Isn’t The Impetus

Top producers in the specialty egg space are consolidating at a time when the supply chain is increasingly strained and prices for consumers are on the rise.

This week, Pete & Gerry’s announced its acquisition of Pasture Brands Holdings, the parent company to Iowa-based egg producer Farmer Hen House and better-for-you yogurt and yogurt drink producer Pillar’s, from private equity firm Benford Capital Partners. Terms of the deal were not disclosed.

“Humanely sourced eggs… are rapidly gaining popularity due to their quality, consistency, and ethical appeal,” said Tom Flocco, CEO of Pete & Gerry’s, in a press release. “As the effects of Avian Influenza continue, this trend is expected to drive a larger share of the egg market toward premium options due to enhanced biosecurity afforded by more distributed farm networks.”

Pete & Gerry’s, a portfolio company of PE outfit Butterfly Equity, operates alongside sister company and fellow humanely-sourced egg company Nellie’s. The business combination will bring an additional 90 partner farms into Pete & Gerry’s network, which once complete, will total approximately 300 family farms. The deal will also “significantly increase” Pete & Gerry’s processing capacity with the addition of an Iowa processing facility, bringing it to a total of four packing facilities across the country.

While egg prices have spiked across the country, reaching an average of $4.15 in December, and widespread shortages reported at grocery stores nationwide, Stephen Scharafin, director of Food & Beverage within Brown Gibbons Lang & Company, told Nosh that this deal was not made to hedge against risks associated with avian influenza (AI).

“Specialty egg companies tend to have little exposure to AI as their farmers have smaller, cage-free barns – think 100+ farmers with 5,000 to 30,000 layers in a cage-free environment,” he said, noting that Farmer Hen House has no history of bird flu within its flocks.

He highlighted that the deal combines “two of the top five leading brands in the specialty egg category” whereby the newly combined company can align farmer networks and leverage national sales resources to support continued growth.

The news comes just a week after publicly traded ethical egg producer Vital Farms highlighted “critical investments” it has made to support its “robust and resilient supply chain” growth efforts that will see it surpass 425 family farm partners this year and bring added capacity with the installation of new production equipment at its Missouri egg washing and packing facility.

Vital expects to ramp up capacity by 30% with the new lines. It also expects to break ground on a second facility in mid-2025 that the company estimates will generate $350 million in additional revenue capacity. That facility is slated to be fully operational by 2027.

As Pasture Brands Holdings moves out of PE hands and to Pete & Gerry’s strategic network, Scharafin said the newly-combined entity is preparing to build the biggest competitor in specialty eggs. He said this deal also highlights the investment appetite for better-for-you, premium CPG products, “particularly within the perimeter of [the] store.”

“Strategic partners are more inclined to pay a premium – which sellers are still expecting – in order to capitalize on recent trends and growth opportunities,” explained Scharafin. “They have the scale and resources to ‘derisk’ investments, despite larger, macro-economic challenges.”

Farmers Hen House was advised by Brown Gibbons Lang & Company (BGL). Giannuzzi Lewendon and Kirkland & Ellis LLP served as legal advisors to Pete & Gerry’s.