Unpacking the Acquisitions of Caulipower and Justin's

0:05Welcome to the CPG Week podcast by BevNet and Nosh. I'm Monica Watris, here with my co-host Lucas Southerd. Now here is the latest in food and beverage industry news. Caulipower, the brand that popularized pizza crust crafted with cauliflower, has been acquired by its longtime co-manufacturer Urban Farmer, a Payne-Schwartz Partners portfolio company and producer of branded and private label specialty dough products. Urban Farmer specializes in premium frozen pizzas, crusts, and bakery products. The company operates two manufacturing facilities in Illinois. And in addition to partnering with brands, retailers, and restaurant operators across North America, Urban Farmer markets a branded line of gluten-free frozen pizzas on various vegetable crusts that are sold in grocery and natural chains.

0:57The combination will create a fully integrated, scaled frozen foods platform. Kali Power will continue to operate under its established brand, benefiting from Urban Farmer's manufacturing capabilities to accelerate new product development, while Urban Farmer is expected to expand its reach to millions of new households and add a strong pipeline of innovation. Founded in 2016, Kali Power offers an assortment of pizza, chicken tenders and bites, pasta, meals, and more, crafted with cauliflower and other vegetables instead of wheat. The products are sold at about 17 ,000 stores nationwide, including Walmart, Whole Foods Market, Wegmans, and Publix.

1:39Caulipower founder Gail Becker will serve on the board of Urban Farmer and will continue to guide the brand's vision as chief brand and innovation officer. Prior to the transaction, Caulipower had raised more than$10.2 million in total funding from backers including BFG Partners, 10th Avenue Holdings, and Continental Grain Company. The business generated$120 million in retail sales for the 52-week period ending March 24, 2024. And regarding the sale, Gail Becker told us that Kali Power led a very small, limited process with potential partners where, quote, we knew we wouldn't have the most synergies, noting that Urban Farmer quickly emerged as the most logical partner.

2:21Last spring, Kali Power brought on Tyler Ricks, a seasoned industry veteran, as chief executive officer to optimize the business, lead a value creation strategy, and explore strategic options for liquidity. In an update of a separate acquisition, it's been about two and a half months since Keurig Dr. Pepper announced it was acquiring European coffee conglomerate J.D.E. Peets in an$18 billion deal that would eventually split KDP into two separate businesses, one focused on coffee and one on the rest of the portfolio of beverages. Last week, KDP held a meeting to assuage nervous investors and quail concerns among stakeholders about the deal.

3:06The biggest news of the event was that private equity companies Apollo and KKR will be making a$7 billion strategic investment in KDP to help fund the deal. Board chair and former CEO Bob Gamgort spoke publicly for the first time about the deal. While Gamgort didn't walk back the decision to bring Keurig Green Mountain's coffee business together with the Dr. Pepper Snapple Group in 2018, he did say last week that coffee, quote, requires a very different management mindset. J.D. E. Peets represented one of the few potentially acquirable coffee companies with the global reach KDP was searching for.

3:44J.D. E. Peets is profitable, bringing in $11 billion in net sales and nearly$2 billion in adjusted EBITDA and has a robust portfolio of regional brands across Europe and in Brazil. Once the deal closes, the newly aligned mega coffee business will focus on driving household penetration, growing premium coffee, scaling cold coffee solutions, and innovating Keurig's at-home brewer systems. As for soft drinks, the KDP's current president of U.S. Refreshment Beverages, Eric Gorley, said that things would remain relatively the same as the beverage business, quote, has a playbook that's working. It will be leaning on its DSD network and will continue to invest in its buy-build partner model, which has lifted up brands like C4 and Bloom while also leading to the acquisition of Ghost Energy last year.

4:34After nearly a decade under the ownership of Hormel Foods Corporation, Justin's is coming back under private ownership with founder Justin Gold and former CEO Peter Burns returning to the company. Private equity firm Forward Consumer Partners purchased a 51 % stake in Justins from Hormel, with the strategic retaining the remaining 49%. Hormel had acquired Justins in 2016 for about$286 million. Burns, who had been working as an investor with Sunrise Strategic Partners, is returning to the CEO role, while Gold will be on the board and working as a strategic advisor. The deal is expected to close by the end of the year, and the cost of the transaction has not yet been disclosed.

5:18Matt Leeds, the managing partner of Forward Consumer Partners, will be the new board chair at Justin's. Once the transaction closes, the biggest near-term priority is, quote, executing a flawless carve-out from Hormel, according to Brandon Staub, partner at Forward Consumer Partners. Justin's is currently, quote, entirely entwined within the broader Hormel infrastructure, including IT systems, financial reporting, and supply chains. Though the process is complex, the Forward team is confident that Justin's will become a fully independent and truly standalone business in the next 6 to 12 months, at which point there will no longer be linkages with Hormel across any functional areas.

6:00Additionally, Justin's will be opening a new headquarters in Boulder, Colorado. Gold will continue in his role as Chief Innovation Officer at Rudy's Rocky Mountain Bakery, which incidentally recently launched a collaboration with Justin's on its line of frozen PB &J Sandoz. When I talked to Justin last week, it seemed like he wanted to focus a lot of his attention on rebuilding the Justin's brand. He addressed that there were some quality and distribution concerns he wanted to fix, as well as he was going to help recapture lost ACV that has been lost since Justin's has been part of the Hormel portfolio.

6:40We also know that once the transaction closes, Justin's will be focused on expanding its portfolio of nut butter and confection products and even, quote, snackfections. Moving on. Monica, I have one question for you. Have you ever tried to play five sets of competitive tennis fueled solely by ancient grains? Actually, no, just four sets. Well, tennis legend Novak Djokovic is a prime example of why you should start. He just became the lead investor and co-founder of corn-free popcorn brand Cobb, the sorghum-based snack brand launched this week on the back of a$5 million seed round investment. Cobb is launching direct-to-consumer with other e-commerce channels like TikTok Shop and Amazon following soon.

7:29The brand will have minor retail distribution in specialty grocery stores in the New York market, but is not expecting to make a broader retail push until Q3. The new popcorn brand is differentiating from other celebrity-backed brands like the Jonas Brothers Backstage Popcorn and Khloe Kardashian's Cloud Protein Popcorn by marketing on the health benefits of Cobb's Hero Ingredient. Sorghum is a resistant starch, so it triggers a GLP response in the gut, giving consumers a more satiated feeling. Cabe is starting with four flavors, Cacio e Pepe, Mediterranean Herb, Olive Oil and Pink Salt, and Seriously Cheesy, and will be available in 24-bag multi-packs in the one-ounce snack portion.

8:18On a lighter note, in conjunction with its 60th anniversary, PepsiCo unveiled a new visual identity to, quote, highlight the depth and diversity of its portfolio, which includes over 500 brands. And Lucas, you have some notes. I don't like it. I don't like it at all. I'm just going to be honest. Wow, that's a pretty harsh critique. To explain, the company's updated logo features a P, which is a nod to its heritage, shaped by the surrounding symbols that represent the values guiding its future, consumer centricity, sustainability, and great taste. Its color palette draws from the soils that nourish PepsiCo's food and beverage products and the hues that reflect its commitment to people and the planet.

9:06But I mean, really good copywriting there, but none of that is conveyed to me when I look at it. I say go hard, you know, be, you know, take a liquid death approach and be something like in your face or, you know, retro or something like that. It just it feels too nebulous and soft. Well, maybe this will cheer you up. Kraft Heinz announced this week its newest limited edition Kraft mac and cheese flavor. And you don't get much more American than this. Apple pie. According to the brand, it combines creamy cheese with cinnamon and tart green apple notes. And to celebrate the launch, the brand has tapped American Pie star Jason Biggs for its marketing campaign.

9:48There you go. See, that's what you need to do. You know, be in your face about it. I think if anybody has learned anything from this show, it's that you have a lot of very strong opinions and ideas about marketing strategy. I have a feeling PepsiCo will not be inviting me to make any comments on their next rebrand. I don't think they invited you to make comments on this rebrand. Here are some other notable bits of news from the week. Canadian beverage maker Cove Soda has closed on$15 million in new funding as it seeks to further fuel its U.S. expansion. Meatstick brand Chomps is preparing for continued growth with a new investment partnership that will build more capacity.

10:31And finally, packaged salad producer Taylor Farms is expanding its global footprint with the acquisition of Nature's Way Foods, a fresh prepared food manufacturer based in the United Kingdom. For these stories and more, become an insider at BevNet and Nosh. And if you're enjoying the show, please subscribe on your listening platform of choice. That wraps up this edition of CPG Week by BevNet and Nosh. Thank you to our audio engineer, Joshua Pratt. Our director is Mike Schneider and our designer is Erin Willett. If you enjoyed the podcast, please subscribe on your listening platform of choice and we will see you next time.