NOSHscape: The Latest Food Brand News

New Barn Acquired by NestFresh

New Barn Organics didn’t buy the farm, it sold it. The company revealed in June it had sold its assets to egg producer NestFresh earlier in the year. It’s a move that will allow the two companies to offer retailers — and consumers — a larger suite of fresh items and hopefully offer New Barn’s shareholders a greater financial upside.

Founded in 2015, New Barn began with a small line of organic almond milk, which eventually grew to include a barista version, a non-dairy Buttery Spread and New Barn branded heritage eggs — which are a collaboration with NestFresh.

Now owned by Tim Luberski, NestFresh was started as a family-owned business in 1991. The company, which sources from small farms across the country, produces shell eggs, hard cooked eggs and liquid eggs in pasture raised, organic, non-GMO verified and soy-free varieties.

New Barn previously raised $3.75 million in 2018, in a round led by New Food SPV, an investment company created to serve as a funding arm for the company and created by New Barn CEO and chairman Ted Robb, with Almanac Ventures also taking part. An October 2018 SEC form for the round noted the company had an “estimated $15 million pre-money valuation.” In total, the company raised just over $5.5 million.

Though New Barn saw rapid growth, Robb said, the company has struggled with supply chain and operational issues. The brand tried to become an all encompassing vegan creamery, launching — and subsequently sunsetting — frozen desserts, coffee beans, cold brew coffee, coconut milk and almond based dips. As a result of this uneven growth, in December 2019 the company decided that it would scale back to focus on West Coast retailers, reducing its footprint by over 2,000 stores nationwide. There was a plan to also layer in food service accounts, but the pandemic quickly put an end to that goal.

Ultimately, Robb said, the company “just never could quite get our feet under us” and decided to use last year’s reset to look for a partner that could help it expand strategically. In early 2020 NestFresh — which had previously supplied the eggs used in New Barn’s ice cream — approached the company about licensing the brand for a line of regenerative organic certified eggs. It was those discussions that eventually led to the current deal, Robb said. Though New Barn spoke to private equity firms, and considered simply raising more capital, ultimately a larger partnership seemed like the best path forward.

“For me, raising capital and trying to manage all of that plus expanding — it was just so much to do as a little business,” Robb said. “NestFresh has a whole team and infrastructure and trucks and cold storage and all the things we were always having to hold together.”

The deal has an unusual structure. Though NestFresh acquired the assets of New Barn — which includes the brand, recipes, products and customer relationships — for an upfront payment, the company itself is still owned by the existing shareholders. However, rather than continuing to make products, New Barn will instead generate capital from an “evergreen” (or perpetual) royalty paid to the company by NestFresh for every product sold. If the company eventually sells again, the shareholders would see returns.

“We formulated a deal around a long term win and that looks like either New Barn grows back to scale and our shareholders benefited from an evergreen royalty or someone comes along and says ‘we’ve got to have this brand,’ we all agree to sell it and there’s some upside,” Robb said.

Moving forward, NestFresh’s sales team will also represent New Barn — the two also share a broker in Presence Marketing. Robb himself will remain with NestFresh for at least a year and continue to assist with innovation, which may include bringing back some of New Barn’s previously discontinued products. He added that a move beyond almonds and new branding will also be forthcoming.

Sambazon Secures $45M Investment, Will Launch Sambazon Hospitality Group to Complement Retail Line

Acai food and beverage brand Sambazon announced in May that it had secured a $45 million investment from NextWorld LLC through its growth equity fund NextWorld Evergreen LP. The company will use the new funding to grow its omnichannel presence, expanding across retail and ecommerce while also growing its cafe business.

Two members of the NextWorld team — managing partner David Fife and partner Tiffany Obenchain — will join Sambazon’s board of directors as part of the deal. The funding round follows an $8 million funding round closed in December 2020, and brings the company’s total net capital raised to date to $60 million, according to co-founder and CEO Ryan Black. A portion of the minority investment was used to exit long-term investors, Black said.

“It was time to accelerate our next stage of growth with a mission aligned partner who valued our vertically integrated supply chain and how we aim to translate that positive vibration into both on- and off-premise retail locations,” Black said. “Nextworld’s vision and commitment to both profit and purpose was a perfect fit.”

Sambazon first launched in 2000 with acai-based juices, energy drinks and ready-to-drink smoothies, and expanded into food with frozen superfruit packs and sorbets. It has shifted its focus from beverages in recent years, doubling down on better-for-you frozen treats with the launch of vegan frozen acai bites in 2018 and ready-to-eat acai bowls introduced last summer. Its organic and fair trade products are sold in over 25,000 locations across natural and conventional grocery and club channels in 45 countries, and it also operates a cafe in Cardiff, California. Sambazon has established a vertically integrated supply chain for its berries and a manufacturing facility in Brazil, using recent funding to triple its production capacity, including constructing a second manufacturing plant in the Brazilian Amazon Rainforest.

Fife was first connected with Sambazon through the company’s board members and CPG veterans Alan Murray and Blair Kellison, first meeting with Black last summer. As a mission-driven brand with a strong growth rate, Sambazon “checked a lot of boxes” for NextWorld, whose investment portfolio also includes sustainable chocolate maker Alter Eco and ice cream brand Van Leeuwen, Fife said. While the company has been around for over 20 years, its latest growth and place as a leader in acai in multiple channels made now the right time to invest, according to Fife. As an evergreen fund, NextWorld will be able to “be patient and think long term” about Sambazon’s growth, Fife said, noting that the company grew its sales by 20% over the past year and is on track to do over $100 million in sales this year.

“[Black] was looking to continue to accelerate the growth away from just being a juice company into being more of a solid CPG omnichannel platform play and was looking for an investor that was aligned around that,” Fife said.

Going forward, Fife said he and NextWorld will be very active in the company, with NextWorld positioning itself as the “long term capital partner” to the founders. NextWorld aims to “reboot the board” with new members, as Fife said he and Obenchain are ready to “hit the ground running” as the company enters its next growth phase.

This next growth phase starts with doubling down on its CPG business as it builds its presence in MULO and natural retailers, Fife said. This also means launching new products: the brand is growing its frozen treat offerings with the launch of Acai Smoothie Pops, offered in Blueberry and Strawberry Banana flavors, which have rolled out exclusively at Whole Foods.

For future innovations, the company will shift its attention from the drink cooler. Black said the company will aim to launch frozen fruit and frozen breakfast items, as well as plant-based novelties and snacks.

“We believe that convenience and organic nutrition coupled with the delicious powers of açai are, and will continue to be, a winning combination,” Black said.

Beyond CPG, the company is also focusing on its cafe business. According to Black, it will use the new funding to launch the Sambazon Hospitality Group, launching Acai Bowl Shops and Kiosks this year offering acai bowls and smoothies. It recently revamped its Cardiff, California cafe as a prototype for this venture, which could include company-owned locations and eventually a franchise model, Fife said. This combination of grocery and physical cafe and shops has proved to be a lucrative model for brands, particularly for its portfolio company Van Leeuwen, Fife noted.

It’ll also be rolling out “turnkey branded concepts” of its acai bowls in foodservice, Black said, that can be used by other cafes and shops.

“In an omnichannel world, one of the best ways to drive your velocities — because everyone talks about selling, but it’s really about sell through — is the combination of having physical retail and on the shelf CPG products,” Fife said.

Sweet Deal: Hershey’s Acquires Lily’s

Low-sugar chocolate brand Lily’s was acquired by The Hershey Company for an undisclosed fee in May. Investment bank Houlihan Lokey represented Lily’s.

Launched in 2012 by Cynthia Tice, Lily’s debuted in Whole Foods Market with four different low-sugar chocolate bars. When VMG invested in the brand in 2018, the company had expanded to baking chips and had added several new bar SKUs, but only had four full time employees. At the time, according to a LinkedIn post by Houlihan Lokey VP Brandon Ng, the company had less than $30 million in sales.

Post investment, VMG brought in a skilled executive team, including CPG veteran Jane Miller as CEO along with CFO Lonna Borden (former CFO at Justin’s and Izze), SVP of Operations Phil Mason (formerly of Thanasi, Evol and Nestle), VP of Marketing Sarah Meis (former VP of marketing for Van’s Natural Foods and Purely Elizabeth) and SVP of sales Seth Monette (formerly of Cookie Chips, Interbake and General Mills). Lily’s also underwent a rebranding, with more modern, colorful packaging designed by Bex Brands.

Since then, the company has been on an innovation tear, with its bar offerings alone growing to 18 options across milk, dark and, recently launched, white chocolate bases. Lily’s also further built out its baking assortment, adding baking bars and flavored chips in varieties like butterscotch, mint, and salted caramel, and added snacking options such as chocolate covered nuts and popcorn. Not every launch was successful — with the low-sugar goal a difficult one to tackle — the brand’s nut butter cups had to be reformulated and relaunched and its low-sugar cookies are no longer available for sale on its website.

The deal will allow Hershey’s to strengthen its presence in baking as well as better-for-you (which the company refers to as BFY) confectionery, the company said in a release. The move comes after Hershey’s divested from its premium baking brands Scharffen Berger and Dagoba in 2020.

“Hershey is focused on developing a BFY confection portfolio that offers a variety of choices to meet the evolving needs of our consumers,” Chuck Raup, Hershey’s US president, said in the release. “Lily’s is a great strategic complement to our existing offerings in this growing segment of the confection category.”

Hershey’s also noted that it sees the BFY confection set as “under-developed.”

Still, there has been plenty of interest in the space by both consumers and investors alike. Most notably, in January of this year, Mondelez acquired chocolate and snacking brand Hu Products. Though Hu also aims for sugar-conscious consumers, it differs from Lily’s by using organic unrefined coconut sugar instead of Lily’s erythritol, stevia and inulin combination for sweetness. Meanwhile, on the sugar candy side, in October of last year TPG acquired gummy brand Smart Sweets, which uses allulose or erythritol in its product lines.

There have also been newer low-sugar entrants, including Mid-Day Squares, ChocXo and Skinny Dipped. Additionally established brands, such as Ghirardelli and Guittard, have also launched their own low-sugar options, while snacking brands including Perfect Snacks, High Key and Quest have tried to enter the BFY confection space as well.

The deal comes after Hershey’s revealed a new strategy for the BFY subsegment earlier this year. Calling out its history with “portion controlled choices” such as the Hershey’s Kiss, the company announced a five pronged approach including: offering more portion controlled treats, extending its core brands into BFY offerings, investing internally and externally in R&D opportunities in sugar reduction, looking to partnerships and licensing deals, and seeking new brands via M&A.

As evidence of this strategy, the company also disclosed its C7 Ventures had co-led a round of funding in Bonumose, Inc., a start-up company working with rare and natural sugars. The venture arm had previously also invested in upcycled cacao brand Blue Stripes Group.

Hershey’s has seen varying degrees of success via M&A as a tactic, particularly as it worked to move from confectionery into the broader snacking space. While Pirate’s Booty has been accretive for the company’s Amplify Snack Brands division, other brands have struggled. Last year Hershey’s sold meat snack brand KRAVE back to its original owners, Jon Sebastiani’s Sonoma Brands, after several years of lackluster performance. Meanwhile 2016 acquisition Bark Thins also has been moved to several different teams.

The company did not immediately disclose where and how Lily’s will be integrated into the larger Hershey’s platform — either under its traditional confectionery team or under Amplified. A press release by Hershey’s noted the company’s headquarters are “based today” in Boulder, Colorado — possibly alluding to a move or integration.

The confection category has had a rocky past year, with the Covid-19 pandemic reducing in-store impulse purchases and scuttling social gatherings such as Halloween, Easter, and Valentine’s Day celebrations. Still, according to research firm Mintel, there’s still plenty of hunger for reduced sugar options.

In a March report the firm noted that 23% of US consumers are concerned about added sweeteners in candy and confectionery, and one in five sugar confectionery eaters in the US have cut back on their consumption in the past year.

“The war on sugar will remain a challenging battleground as our research reveals that consumers overwhelmingly want to keep their usual chocolate products without sugar reduction,” the report noted, “In the year post-COVID, expect to see a divide among global chocolate consumers – those that take their health and wellness seriously, reducing or eliminating chocolate consumption, and those that prioritize the indulgence and comfort that chocolate can bring.”

Bar Maker Verb Expands Its ‘Holistic Energy’ Platform

Many food and beverage makers often look to adjacent categories for their first brand extension. However, caffeinated bar maker Verb is making a larger leap for its first foray beyond bars: EDM, which stands for Energizing Drink Mix (not electronic dance music). The new line promises consumers a jolt of energy from caffeine, not a bass drop.

Verb’s expansion into drink mixes follows the close of a previously unannounced $8 million funding round earlier this year, which will support the brand’s move into energizing food and beverage products.

The funding round included investment from Melitas Ventures, Valor Siren Ventures, CircleUp Growth Partners and returning investor Global Founders Capital. The latest funding round follows seed rounds in 2019 and 2018 and brings Verb’s total capital raised to date to approximately $13 million.

Verb’s flagship energy bar line, first launched in 2018, recorded a 300% increase in sales last year. Verb co-founder and CEO Matt Czarnecki said the growth gave the brand confidence that there was an unmet consumer need for energy products. The company settled on drink mixes after conducting consumer research and launched its Energizing Drink Mix — in Raspberry Lemon, Mango Tangerine and Cherry Lime flavors — for $19.95 per 12-pack. The line will initially be sold direct-to-consumer via Verb’s website.

“We conducted thousands of surveys and hundreds of in-person interviews with our customers and realized that this was a real need-state for lots of people and a product category that we felt we could really disrupt,” Czarnecki said.

The allulose-sweetened mixes contain five grams of collagen, B vitamins and 65 grams of caffeine from organic green tea. This caffeine content, in line with its energy bar line, is relatively low compared to similar offerings from Nuun, Hydrant and Liquid I.V., which range from 80 to 100 mg. Czarnecki said the caffeine content is intended to create a “balanced energy effect” that many energy drinks don’t offer, while also containing no added sugar. Although the move from bars to energy drinks seems like a significant shift for Verb, the line helps the brand reach more consumers as a direct competitor to other caffeinated food and beverage offerings, rather than just bar brands, he added.

“Really from day one, we’ve strived to become a holistic energy brand and to help our customers live vibrant and energized lives,” Czarnecki said. “When we look at the competitive set, we’re looking at brands like Red Bull and 5-hour [Energy] and Celsius, and less so brands like Clif.”

Additionally, the new funding will go toward growing Verb’s 30-person team, which is relocating this summer from Boston to New York City. The company also plans to invest in research and development to expand its EDM line and launch new offerings. While its current products all contain caffeine, Czarnecki said the brand’s mission is about “more than just caffeine” and will offer products with different benefits and functionalities in the future.

The direct-to-consumer channel will remain the brand’s focus for the time being, having benefited them during the pandemic, when in-store bar sales declined. Czarnecki credits this growth not only to shifting consumer shopping behaviors during the pandemic but also the close connection the brand has formed with its consumers through a text commerce platform, social media following and subscriber base.

“It’s one thing to test [products] in the kitchen, but it’s a completely different thing to put them out into the real world,” Czarnecki said. “We feel that by having super direct relationships with our customers, we can actually iterate and improve upon a product from the get go.”