NOSHscape: The Latest Food Brand News

Nestle Health Sciences Eats Up Vital Proteins

Nestlé Health Sciences (NHSc) announced in June that it had acquired the majority of collagen-focused function food and supplement brand Vital Proteins.

The terms of the deal were not disclosed but Vital Proteins will remain a standalone entity and continue to operate out of its Chicago headquarters. Founder Kurt Seidensticker will remain with the company, continuing to manage the business as CEO. As part of the sale, NHSc will also acquire Vital’s 180,000 square-foot manufacturing and distribution center in Chicago.

Vital previously raised $19 million in November 2019 from CAVU Venture Partners. As part of this transaction, CAVU has exited the business, with Seidensticker buying back CAVU’s rollover shares as part of a minority investment he will continue to hold in the brand.

The company’s line of 150 bars, shots, enhanced waters, powders and supplements first were sold online, but in the seven years since the company started it has expanded into 35,000 retail doors including Whole Foods Market, Target, Costco, Walgreen, Kroger and Sprouts.

Part of the motivation to explore a sale, Seidensticker said, was to support further expansion into new channels and geographies — particularly Asia and Europe.

“I saw the opportunity globally that the rest of the world might [be] three to five years behind where the US was on ingestible collagen,” he said. “As we try to look at global expansion it becomes more challenging without a strategic partner like Nestlé. I started to think about if we want to bring wellness to the world, having a resource like Nestlé will help us achieve that goal.”

The company began exploring a sale at the end of the fourth quarter last year, with discussions beginning in earnest with NHSc less than two month ago. Siedensticker added that he has considered selling the company for a few years but said “one of my challenges was that I was never quite ready to make that transition.” The ability to run Vital as a standalone entity assuaged that concern, he said, along with NHSc’s knowledge of food, beverage, and supplements.

Nestlé Health Science’s portfolio is a mix of consumer-facing brands like Atrium Innovations, Pure Encapsulations, and Persona, as well as many brands sold into the medical channel.

NHSc acquired Atrium Innovations, which counts the Garden of Life brand in its portfolio, in 2017 for $2.3 billion. During 2019, Nestlé divested itself from several food and beverage brands, and on a February 2020 call with investors, Mark Schneider, Nestlé S.A. CEO hinted that this was in preparation for acquisitions to come. The company, he said, was looking to acquire “higher growth, higher margin” companies – pointing to Atrium Innovations as one such past example.

JUST Seeks New Strategic Partners

Sometimes you have to break a few eggs to make a plant-based omelette. When JUST — then known as Hampton Creek — started up roughly a decade ago, founder Josh Tetrick wanted to shake up the food industry.

While his goal has remained the same, the path has changed. The company has expanded its strategy beyond its own branded products to form strategic partnerships with a focus on ingredients as the way forward. To start, the company announced a new food service partnership with Michael Foods, a subsidiary of Post Holdings and one of the largest processors of egg products in the world.

Under the terms of the agreement, Michael Foods will be the exclusive food service manufacturer, supplier and distributor of JUST Egg liquid as well as JUST Egg folded (a frozen patty). The key ingredient in both is a protein derived from mung beans, which yields an egg alternative that is cholesterol-free, dairy-free and non-GMO. JUST expects the first production and shipments from Michael Foods to roll out later this year.

Under this new model, JUST will find and develop novel ingredients, such as the JUST egg protein, as well as conduct the R&D to create finalized products. The company will then sell this raw product to producers, who will follow a specific manufacturing process and recipe, package the item, and sell it into retailers or food service providers.

In terms of awareness and marketing, JUST will manage large brand-building initiatives such as digital marketing campaigns, in-person activations, and television commercials, while producers will commit to industry specific marketing activities such as promotional plans in retailers.

Currently JUST is using co-packers to produce its liquid and frozen products, but aims to have all product, packaging, and marketing transitioned to partners such as Michael Foods by the end of 2020.

The hope is to put JUST in a position to potentially capture a wider consumer audience, especially as the COVID-19 pandemic brings to light some of the systemic issues with egg, meat and dairy supply chains. As of the end of April, year-to-date sales of JUST Egg are up 200% over 2019, the company said, adding that as of May 17, the company’s sales surpassed 80% of other egg SKUs. While some of this may be attributable to eggs being out of stock in some retailers, these sales are still driving new trial of the product.

With Deal, Utz Hopes to Become National Snacking Program

Utz Quality Foods LLC announced last month a new partnership with Collier Creek Holdings to combine and go public as a snack food platform under the name Utz Brands. The transaction is expected to close in the third quarter of 2020.

Founded in 1921, Utz is the largest family-owned, privately-held salty snack company in the U.S. In a presentation, Collier Creek noted that Utz has had more than 43 years of consecutive adjusted net sales growth. The fourth largest salty snack company nationally, and second in its core geographies, Utz’s 2020 net sales are estimated to be roughly $910 million. The company currently sells over 5 million pounds of snacks per week, across over 107,000 retail doors.

Once listed on the New York Stock Exchange, Utz is expected to have an initial value of $1.56 billion. The Rice and Lissette family, the founding family and current owners of UTZ, will retain roughly 90% of their existing equity, which accounts for just over 50% ownership of the new company. Moving forward, Dylan Lissette, the CEO of Utz Quality Foods since 2012, will serve as CEO of Utz Brands.

Collier Creek was founded in 2018 by Roger Deromedi, a former CEO of Kraft Foods and Chairman of Pinnacle Foods, alongside Jason Giordano and Chinh Chu, two former managing directors at private equity firm Blackstone and current managing directors at CC Capital. The pair raised $475 million to form Collier Creek Holdings as a special purpose acquisition company tasked with establishing a new CPG platform.

Chu said the team’s objective was to find “Pinnacle 2.0,” which he described as “an attractive platform asset well suited for value creation strategies” through accelerating topline growth, improving margins and making strategic acquisitions. Utz was appealing because of its portfolio of iconic brands, manufacturing capabilities and distribution network, which largely relies on a direct store distribution (DSD) model which services 70% of all accounts..

Although many of Utz’s brands lean towards conventional shoppers, the company has acquired several better-for-you brands including Snikiddy in 2015, Good Health in 2014 and Boulder Canyon in 2017. The latter two have performed well at retail, with Good Health’s sales growing from $13 million to $48 million over the last five years.

Sesajal Invests in Rhythm As it Looks to Further Build Branded Business

Americans are eating a lot of snacks, and Sesajal S.A. de C.V. wants a bite. The ingredient processor and owner of condiment brand Chosen Foods announced in June the closing of a minority investment in produce-focused snack brand Rhythm Superfoods.

The investment, which closed in April but was only recently disclosed, consisted of capital, finished product and equipment, including a production facility in Guadalajara, Mexico. Rhythm plans to seek additional funding within the next few months but needed to close this part of the round in order to assume ownership of the plant, which has been renamed Alamo in honor of Rhythm’s Texas roots.

Sesajal has been Rhythm’s copacker for almost six years, and the investment is aimed at helping the two companies better integrate and align their business goals. The brand originally was producing its vegetable and fruit snacks in Colorado, but realized that being closer to where the raw produce was grown could improve product quality and reduce costs. According to Rhythm founder and CEO Scott Jensen, Guadalajara is an ideal location because produce can be grown 12 months of the year.

Sesajal CEO Iñigo Gonzalez added that the deal provides his company with more insight into the entire life cycle of the business, which can inspire greater collaboration on R&D, sales and marketing further down the line. For example, Sesajal has distribution for its products in Mexico, South America, Europe, Asia and some of the Middle East, which are markets Rhythm could eventually move into as well.

Sesajal has an integrated supply chain that is unique to its business, Jensen said. By agreeing to purchase all crops in advance, regardless of quality, Sesajal has input into the growing methods and crops of its partner farms. The purchasing strategy works only because the company has so many uses for each ingredient, Chosen Foods CEO and Chairman Gabriel Perez added.

Now, Jensen said, Rhythm will also benefit from this robust supply chain, noting that Sesajal has already helped the brand secure additional sourcing for its cauliflower bites line. Because Rhythm only needs the florets from the plant, the ingredient processor will dehydrate, pulverize and sell the plant’s stems and smaller pieces as a bulk cauliflower flour.

The deal will also move Sesajal further into the branded CPG product world, the culmination of a process that started seven years ago, Perez said. At the time, 95% of the company’s sales came from B2B ingredient deals; Now, following the acquisition of Chosen Foods in 2017 and its subsequent expansion, revenue is closer to a 50/50 split between ingredients and branded products.