NOSHscape: The Latest Food Brand News

Popchips Sold to From the Ground Up Parent Company

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

Terms of the deal, which closed in November, were not disclosed. Amit Pandhi, CEO of VSB, as well as executives from Powered by Real Food From the Ground Up declined to comment for this story.

“This addition expands our roster of brands and positions us to be your go-to partner for better-for-you snacks,” a notice sent to retailers late last month said. “Adding Popchips to the portfolio is true to our beginning, we never stop evolving, and striving to give consumers what they want. It’s been a core value to our company from day one. The expanding Powered by Real Food From The Ground Up portfolio positions us to meet all your needs.”

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

Popchips had less than $5 million in sales when TSG invested, but, boosted by celebrity endorsers like Katy Perry and a sales team laden with veterans of the Vitaminwater brand,grew annual sales to $75 by 2012. However, at the time of the acquisition by VSB, Popchips was reportedly struggling with distribution and manufacturing issues, both impacting sales.

Under Pandhi’s leadership, Popchips achieved its first profitable quarter ever in 2021 and first profitable year in 2022, reporting roughly $50 million in sales, according to a prospectus sent to potential acquirers.

Those gains have come against the backdrop of $4.5 million in cost savings generated by cutting payroll and switching from company-owned manufacturing to a co-packer. Freight and warehousing expenses were also cut 11%, under VSB’s ownership, while over 120 employees were dismissed. VSB executives also slashed the company’s SKU count from 64 to 21 by streamlining pack size options and dropping the company’s Nutter Puffs and Ridged Chips in order to focus on the core product line.

The snack brand also is a private label partner for Aldi, Kroger, and Safeway.

As of March 2022, when the VSB began investigating new financing options, Popchips reported 234 trade points of distribution, according to the U.S. MULO SPINS/IRI data included in the prospectus. The company reported 4% household penetration, far lower than the 26% and 8% of other better-for-you snack brands SkinnyPop and Popcorners, respectively. With a 29% increase in dollar velocity growth year-over-year, compared to the 15% seen in the “better-for-you” snack category, there was potential to see dollar gains by driving distribution.

“As the pioneer in BFY snacking, Popchips enjoys strong consumer awareness and is highly coveted by the most desirable cohort of snacking shoppers,” the prospectus said. “Popchips remains one of the only independent snack brands of scale and is well positioned for long-term growth.”

VMG was “open to a variety of alternatives” regarding financing, ranging from an outright sale of the brand to partnering with a new investor as they “strongly believe[d] in the long-term potential of the brand,” the prospectus noted.

Despite impressive growth, Popchips faced a limited pool of publicly traded strategic acquirers. PepsiCo acquired Popchips competitor Popcorners in 2019, while Hershey’s Amplify has been noticeably quiet when it has come to acquisitions in recent years. B&G previously announced its intentions to exit the snacking set and is seeking to sell its Back to Nature snack brand.

Enter Powered by Real Food From the Ground Up Founded in 2018 as a portfolio company of investment and incubation platform Halen Brands, the company produces grain-free, vegetable-enhanced salty snacks under its Real Food From the Ground Up brand, as well as its newly launched You Need This brands. Halen Brands, and the firm’s founder Jason Cohen, exited the company in 2022, with president and CEO Aaron Greenwald subsequently assuming control.

When VMG announced the acquisition of Popcorners, and creation of the VSB, the firm planned to acquire and build a platform of snacking brands that could share common back office functions, such as finance and operators while also offering a portfolio of snacking options during a single sales call. However, that path never came to fruition. The capital for VSB came from VMG’s fund IV, and once the VC group moved onto Fund V in 2021, the potential for any future investment or acquisitions became unlikely.

VMG general partner Wayne Wu declined to comment as to the history of VSB or the Popchips sale.

Birch Benders Acquired By Hometown Foods As Sovos Narrows Focus

Less than two years after the baking mix brand was sold to Sovos Brands, Birch Benders announced in January it had been acquired by baking platform Hometown Food Company.

Details of the transaction were not disclosed.

“The Birch Benders acquisition is a wonderful addition to Hometown Food Company’s portfolio of brands and it increases our footprint in the better-for-you, breakfast and baking categories,” said Tom Polke, president and CEO of Hometown Food Company in a press release.

Hometown, owned by private equity firm Brynwood Partners, manages a baking product portfolio that includes the Pillsbury Baking Co., Funfetti, Hungry Jack, Arrowhead Mills, White Lily, Jim Dandy, Martha White, and De Wafelbakkers — all formerly part of the J.M. Smucker Company. Hometown operates a 650,000 square foot plant in Toledo, Ohio.

Birch Benders will expand its offerings in the better-for-you baking set and complement legacy brand Arrowhead Mills within the overall portfolio, Brynwood executives said in a release.

The move positions Hometown to compete with brands like protein-enhanced baking and snack maker Kodiak Cakes, which was sold to private equity firm L Catterton in 2021.

Birch Benders was sold to Sovos brands in August 2020 by its co-founders Lizzi Ackerman and Matt LaCasse for $151.4 million. At the time of that deal, Sovos said Ackerman and LaCasse would have a five year “consulting agreement” with the low-sugar and low-carb brand.

Though Sovos has tried to expand Birch Benders into new categories, launching shelf-stable cookies last year, the brand has struggled. On its third quarter earnings report in November, Sovos reported a roughly 34% decline in net sales for Birch Benders due to a softening of both the pancake and waffle mix categories as well as waning consumer interest for keto-centric products, a core point of differentiation for many of the baking brand’s SKUs.

Birch Benders represented only 5% of Sovos’s net sales in the third quarter, compared to Italian food brand Rao’s which represented 64% of sales. In a press release, Sovos CEO and president Todd Lachman said the divestment would allow the company to focus attention around a smaller subsegment of brands.

“[The] announcement reflects Sovos Brands’ continued commitment to growing our core Rao’s and Noosa brands and, in particular, accelerating Rao’s to $1 billion in net sales and beyond,” Lachman said. “As we look ahead, Sovos Brands will be a more focused business that is better-positioned to drive sustainable sector leading growth for years to come.”

NotCo Raises $70M To Build B2B Business And “Operate Like Coca Cola”

Backed by $70 million in new growth capital, plant-based food and beverage company NotCo is aiming to build a business-to-business food technology platform “that operates like Coca Cola.”

Since launching in 2015, the Chilean company’s funding has totaled nearly $433 million. The latest round, announced in December, was led by existing investor Princeville Capital, with additional participation from Bezos Expeditions, Tiger Global and L Catterton, among others.

According to co-founder and CEO Matias Muchnick, NotCo will continue to operate and make growth decisions with the heightened inflation and currency exchange rates, as well as the geopolitical environment and overall global economic climate, in mind. Against the backdrop of those challenges, he also highlighted the value of having Marcos Galperin, founder and CEO of MercadoLibre, the largest Latin American tech company, on board as an investor.

Galperin will serve as Muchnick’s “potential favorite mentor in the world,” he said, noting he has admired Galperin’s ability to stay at the helm of his company for the past 22 years.

Establishing the B2B platform will be essential to executing that long-term goal, but will also allow NotCo to scale its technology quickly and efficiently, a strategy Muchnik believes is essential for NotCo to “capitalize on its uniqueness,” which he said is rooted in its technology and artificial intelligence platform named Giuseppe. Developing the B2B arm will help take the company “out of the shadows” of what Impossible, Beyond and Oatly are capable of doing, he claimed. In 2022, the company announced a joint venture with the Kraft Heinz company and just launched its first co-branded product, NotKraft Singles, in October.

Muchnick declined to speak to the entirety of NotCo’s relationship with Kraft, citing confidentiality agreements, but he confirmed that all future NotCo partnerships will develop co-branded products. NotCo will have control over how its technology is applied, work on product R&D and everything else it takes to get the item to shelf, but once launched, the partner company will be charged with scaling up manufacturing, distribution and commercializing the new ‘NotProduct.’

“The physical world is a very difficult world – supply chain issues, scalability, manufacturing – all of that really brings a lot of headaches,” said Muchnick. “For us, a licensing agreement brings two things: simplicity of the business and an angle to our business unit and revenue streams at very high gross margins. [We are] focusing on margin contributions and bringing NotCo, in the next two years, to be a profitable company.”

Cobranding products offers value to both parties, Muchnick explained. In the seven years since the company launched, it has capitalized on the work of its own brand and the technology and artificial intelligence capabilities it has built. After the joint venture with Kraft was announced, Muchnick said slews of large food companies began reaching out with requests the company make a “Not” version of their product.

“All of the requests were actually considering the brand on the front of the pack because what they can’t do as a corporation, multinationals cannot connect to a [newer] generation of consumers,” he said. “They have had a hard time doing that. With the element of the branding of NotCo and calling it ‘Not’ they can connect to a consumer that maybe in the past they couldn’t.”

That branding seems to be resonating with Kraft consumers: though currently in just 30 stores, sales of NotKraft singles are 1900% higher than expected, said Muchnick, adding that the partnership has worked incredibly well because both sides have strong self-awareness to their respective roles. Looking to 2023, the joint venture will see NotKraft products enter four new categories.

The company has also partnered with foodservice operators throughout Latin America including Starbucks in Mexico with NotMilk and Burger King in Chile which Muchnick claims sells 32 NotMeat units per store, per day. In December, it was announced that Dunkin’ will roll out two plant-based NotDonuts.

“This is the real chance of making a democratic plant based industry and not just the Ivy League of it, not just the premium product,” said Muchnick. “It makes sense to jump on the shoulders of our distribution partner like Kraft with the commercialization platform that they also already have.”

This approach is already supported by how NotCo functions within its own operations. The company has managed to scale by outsourcing its manufacturing and distribution and currently works with 50 different co-packers around the world, an approach inspired by the Coca-Cola model. By selling its technology the way Coke sells its concentrate, NotCo has been able to position itself to “out compete” all of its “comparables” (Beyond Meat, Impossible Foods and Oatly) in terms of the strength of the business, he explained.

He aims to operate NotCo with half the business dedicated to branded products and the other half from co-branded partnerships in the next five years. Muchnick believes with this approach NotCo is poised to outcompete plant-based leaders across categories, citing the likes of Beyond Meat, Impossible Foods and Oatly. Since the company’s start, he emphasized it has focused on building the business with an efficient profit/loss ratio and high gross margins.

“We always understood that if we don’t operate very efficiently, then we’re not going to make it,” said Muchnick. “For us, it’s about moving the needle towards sustainability as fast as possible because this fucking world needs it, very fast. The only way to do that is with speed and we needed to understand how to do it very efficiently.