Why Isn't Big CPG Acquiring More Better-For-You Brands?

0:10Hello and thanks for tuning in to taste radio the number one podcast for anyone building a business in food or beverage. I'm Ray Lateef, the editor and producer of Taste Radio, and with my co-host for this episode, John Craven, Jackie Brugliera, and Mike Schneider, who has the coolest shirt on of the four of us right now. I believe that's Jackie. It's Jackie today. This gal right here. Who's wearing a white t-shirt that says oat milk on it, and the font of oat milk looks like an old high school varsity jacket lettering kind of thing. I thought I was going to win. I wore my new shirt today, and then Jackie pulls that up.

0:44That's your Bert and Ernie shirt, isn't it? Yeah, what are you wearing? What? It's a nice one. I like it. Yeah, I just found it at a thrift store and it was in my size. It was meant to be. I was like, this is so on brand. You're walking by the thrift store and it's like, Jackie. Literally calling my name. Jackie, you're so Gen Z, even though you're not. Thrifting. I'm trying. I'm trying. Yeah, thrift. I mean, thrifting, I feel like is also a bigger thing in California and in San Diego. There's a bunch of thrift stores. So I've been thrifting a bit. But yeah, very Gen Z of me. And I found this.

1:19And I've been having, you know, a renaissance with oat milk lately. I went to almond milk. And now with Super Basic, I've just been drinking more oat milk. That stuff's so good. So good. Super Basic rules. I hear mixed reviews about oat milk these days. You just drink cream. I just drink cream. But have you had Super Basic? No, straight from the cow. Have you had Super Basic? It's the new oat leaf, four ingredients. We got to get some of that. You should just stop making the other oat leaves. It's so good. It's so good. That should just be Oatly. What was weird is, Jackie, when you and Amanda Smierlinski did your tour of Sprouts, or at least your little shopping extravaganza at Sprouts, I was actually kind of surprised to see that product on an ambient shelf.

1:58It was in refrigeration. It was refrigerated? Yeah. Maybe you guys put it there to make it easier for people to see. But it looked like it was on an ambient shelf next to like, what's that one? Pacific Naturals or Pacific Organic? Yeah, that brand, which is non-refrigerated. I think it could be they just decide to put it next to the milk because that's where people expect milk to be. For sure. For sure. Anyway, is there a tag on the back? Is there a brand associated with your oat milk t-shirt or no? It's just super random. Someone really loved oat milk and decided to make this t-shirt. That's a great name for a brand, actually.

2:29Super random. Super random. For a clothing brand, anyway. Yeah, that could be, oh, they could have fun with that, too. Probably been done. Probably been done. Actually, on the way over, I was thinking, you know, it'd be an awesome name for like an Instagram account or even like a bar. No. Tequila Markingbird. 17 Octopus. No. Tequila Markingbird. And then like literally three seconds later, I'm like, I'm sure someone has that. You did not invent that. Did you check it? Yes. I checked it. Yeah. There's a cocktail bar. There's several Instagram accounts. Yeah. So we'll just try to go with, what's the name of our brand again?

3:00Something random? Super random. Super random. Super random. That's the new name of the brand. It's called I Forgot. Well, you know what's not super random is our unofficial guide to Expo West. That's Nosh's unofficial guide to Expo West penned, or at least led by managing editor Monica Watros. They did an incredible job. We have five articles on the site, Nosh that is, about things like the ABCs of Expo West, how to stay healthy, safe, and sane at the show, surviving and thriving in an investor's perspective. No booth, no problem. Backpacking at Expo S. And from Hawkeye to hijack your etiquette at the show.

3:38So much good information. A lot of it free, actually, which is nice. Did they tell you not to take more than one USB stick? No, but, you know. Always a problem for you, Ray. I shared my own insights about how to stay safe and healthy. Yeah. Good team effort there. We've got some writing from Jeff Kleinman there. We've got some insights from Ray Lateef himself. Monica Watrous, as you said, yeah, there's some kind of stuff. And, you know, useful stuff, a little bit of humor. It's good. A little bit of humor. Yeah. I was chuckling a couple of times reading through it. Yeah. I'll tease my little part here.

4:12Nate Rosen sent me a DM with one word, scurvy. Scurvy. You know, I'll just share this one thing. You can find this in the article, but I'm encouraging everyone. Don't just rely on hand sanitizer. Please, please, please, please, as often as possible, wash your hands with soap and water and do it frequently because hand sanitizer, it's good in a pinch, but you need to wash your hands. Please stop stuffing your face with samples without having clean hands. Use a napkin. All the people who are running from their booth and look like they're in a hurry are running to the bathroom because they're probably going to meet you.

4:50Wash their hands. You know where to find Ray. I'm surprised he didn't say, if you expect to shake my hand, please be wearing latex gloves no do you do the handshake ray or do you do the like fist bump or i do the handshake more than mike does mike does the fist bump the elbow bump yeah ray does the one where you go for the shake and then he puts his hand up and kind of rubs his hair a little bit no i i thought it would be more of a fist bump guy in the era but i i don't do the fist bump a little too bro-y for me yeah it is you know that's why i do the elbow elbow seems like you you wanna get cross-checked or something.

5:26It's very UFC. I'm into that. I have very pointy elbows, so it's kind of like a hazard. So I try to avoid that. I have pointy elbows too. Yeah, maybe that's why we don't do it. But no, I'm practicing stabbing someone with my elbow. By day one of Expo West, my shoulder wants to fall off. That's true. I also like doing the bro handshake where you crash hands together and it makes a big sound. Yeah. Because then everyone knows, is, oh, wow, it's two cool people hanging out. They know each other. They know each other. The louder the slap, the deeper the relationship. I'm going through seven years of seeing that in my head right now.

6:05I just want to start chest bumping. Yes, chest bumping. That would be fun, actually. You could have a Taste Radio gold ring and have people kiss it. Oh, for crying out loud. Yeah, just by the bathroom door. Listeners, do not chest bump Jackie at Expo West. That's weird. I can handle it. Let's go back to the gold ring for a second here. It's just, I'm thinking about that right now. And I think if anyone ever like was like, hey, Ray, where's your gold ring that you talked about in the podcast? I'd actually, I'd fly back home. I'd be like, you know what? That's the peak of my idiocy and celebrity as it were in the food and beverage industry.

6:46Kiss the gold ring of Taste Radio. Please don't, please don't ask. So yes, Expo West next week. We will be there. Most of us will be there from the 12th to the 16th. I think a couple of us are still going to be there to the 17th. Nope. No? Oh, no. Nope for me. Okay. Well, reach out. We're all going to be gramming. We're all going to be... John will be tweeting, X-ing, whatever you do. I don't really multitask at these things super well. You're just going to be gramming? No, I just wait until I get back to my place and probably more gramming. Well, I feel like that's probably the best way to get a hold of us at this show is not to email us, not to text or call, but to gram.

7:22Slide into our DMs. Slide right in. I'd like a LinkedIn DM, please. There you go. No, I don't check those things during the show. Mike is BevNet Mike. Mr. Craven is BevNet Craven. Jackie is BevNet Jackie, Q-U-I. I have the hardest one. It's BevTrade, B-E-V-T-R-A-Y-D-E. But yours is going to pop up when they're looking for ours, so it happens. Just find the blue shirt in the crowd. Yours kind of looks like BevTirade, by the way. that works too so a friend of mine actually he he teases me and he says it looks like bev trade raid which i don't know what that even means but where did bev trade come from i started that account in 2016 and it was intended to be sort of a i don't know a playful way of talking about my job in the beverage trade, right?

8:15So BevTrade with a Y. Oh, got it. Hey, clever. The fact that no one got it means it's as dumb as heck. It has a Y in it. It's like, you know, it's your name in it. Yeah. Just switch to Ray from Taste Radio. Well, the other way to do it is Taste Radio with a Y. No, see, that's the same as BevTrade. Is it? Yeah. Okay. All right. Taste Radio. You know what? You have much more marketing experience than I do, Mike. So I think you're probably on the right track here. Be that as it may. Be that as it may. You know, you used to drink before your Super Curious days. You used to be a hard kombucha guy, right?

8:50Oh, yeah. I like hard kombucha. You were always a kombucha guy. But how do you feel about hard kombucha? I really like June Shine. It gave me the alcohol experience that I was looking for when I was looking for an alcohol experience. So I'll just shout out to June Shine. But yeah, I think hard kombucha is pretty good. Some of it's a little too boozy for me, but not June Shine. Well, Juneshine is, I think, the brand that most people associate with hard kombucha when you talk about that product and category. Can I shout out to Hard Tapache as well? Of course. Crooked Owl, that stuff's really good.

9:19It is really good. That gives me a similar experience. Yes. An adjacent segment, not really a category yet. But anyway, Juneshine, the San Diego-based company, that maker of hard kombucha and canned cocktails, announced that it would acquire beyond beer brand Flying Embers in an all-stock transaction. That was announced yesterday. Justin Kendall, who's the editor of Brewbound, wrote this story. Flying Embers is also a maker of hard kombucha. They make beer. They make seltzers, hard seltzers. I think they make a wine too, don't they? or am I not sure? They had a few innovations. But according to the article, the acquisition will make Juneshine by far the largest hard kombucha company in the country.

10:10The combination of the two brands will account for 63 % of all hard kombuchas sold in the United States, according to this article. Did not see this coming. John Craven, your thoughts? Yeah, definitely did not see this coming. I think also noteworthy in that is that it does not include the physical brewery. You know, it's clearly more about the brand and the owning more market share. Flying Embers Brewery. Yeah, correct. I don't know. I have mixed feelings about it, to be honest. I mean, owning that big of a chunk of a category that I think is maybe having a little bit of growing pains, to put it nicely.

10:50and taking away, you know, another competitor that was probably spending to build awareness and help further the category. You know, I think that's could go either way, I guess. And it's if it's not a production play, that's that's another thing that just kind of makes me raise my eyebrow. If you're not getting the breweries to be able to increase production, what's going on there? Oh, I think it'd sort of be very difficult to not read into this as Flying Embers was a distressed brand. And if they have a brewery, that's an asset that someone will certainly pay cash for and the brand, you know, get somebody else to run it.

11:30Yeah, it sounded like Juneshine also just wanted to increase distribution and Flying Embers had distribution in areas that they didn't have. So that was probably another big deciding factor. And I feel like now they have just a bunch of different types of products. So they're like fully like a platform of innovative alcohol products. Well, in June Shine, I mean, I think, you know, as kind of background of this too, I mean, they had rumored to have been up for sale at one point, then they raised, I think it was$10 million from InvestBev. They're also about to launch a light beer brand. You know, there's like a lot of things going on here that acquiring Flying Embers probably would not have been on the list for anyone.

12:14But, you know, interesting. I think definitely some good stuff in both those brands. So, yeah, interesting in the article, Forrest Dean, who's one of the co-founders of June Shine, said that four years ago, this probably wouldn't have made sense for June Shine. But today it's perfect timing. And in Flying Embers, they found a brand that was, quote, more complimentary than we originally thought. So I'm sure there was a lot of due diligence and research on how the brands kind of fit together in one portfolio. So while it is surprising and while, you know, I think there are some questions about does this help the category of hard kombucha specifically, I hope it works because they're two great brands.

12:52And, you know, hard kombucha has had this weird trajectory of, you know, it's going to be the next big alcohol category. And it really hasn't kind of been that yet. So, yeah, interesting to see how this all plays out. Yeah, hopefully some of that means there's people synergies between the two as well. So they can, you know, just get more work done. Absolutely. Now, hard kombucha, I think in our business was looked at as being, again, a growth category, a potential to expand the opportunity for alcoholic beverages because it was a better for you option, right? And it was better for you supposedly than beer, wine, or liquor.

13:33ultra processed foods on the other hand i think most people look at them and say these are just not good at all there's no way to make these i guess better from a optics perspective or from a health nutrition perspective but i don't know if that's necessarily true and errol schweitzer who is a long-time food industry vet former whole foods executive and now i would say, active pundit when it comes to food and beverage, penned a recent article for Forbes titled, Why Now is the Time to Reinvent Processed Foods. This was a great, great article. And he talks about the history of processed foods and how a lot of it was born out of World War II, when the United States wanted to make sure that its soldiers were properly fed and had enough food to eat.

14:30That's why they were always packing these foods with preservatives and just hoping that they could have enough nutrition and last long enough so that they could fight in a long war if necessary. Now, according to Errol, we live in a permanent wartime economy, at least the grocery industry, in his words, is to this day a permanent wartime economy. The agribusiness sector solidified during the post-war era to ensure cheap, calorie-dense, convenient, and abundant food for all has led to widespread consumption of ultra-processed food and has wrought, according to Errol, enormous damage to human health and the environment.

15:10But he does note that there is some opportunity here. If you think about, you know, frozen food brands or better for you frozen food brands, like a Saffron Road, which, you know, let's call it what it is. It's a processed food, but they're a heck of a lot better than, I don't know, can I, can I say Stouffer's? Stouffer's? I mean, you know, you said it. Hungry man? Hungry man? Yeah. You know, and he talks about how we're seeing some regulation. We're seeing governments take action to reduce the amount of ultra processed foods or reduce the kind of ingredients that are causing all kinds of problems for human beings.

15:44But I think, you know, voting with your dollar and putting pressure on the big companies to acquire and work with some of these smaller brands, I think would be good for the industry as a whole and America as a whole. I just don't know why there isn't enough emphasis on this. I think, look, this whole argument is, I think, to some extent said or often said from a position of privilege since you know i would almost argue that there's a much bigger just food security issue out there that you know we're sort of stuck in a vicious cycle of you know needing cheap food you know people being concerned about prices and yeah i mean most people aren't in america aren't loading up their grocery cart with like high-priced stuff, right?

16:34You know, there's a reason that these companies are producing low-price, I guess, durable, maybe, food products. You know, you can buy a loaf of bread and eat it over a week, right? Which is not how fresh bread works, you know? So maybe there's an argument to be made that if we didn't have this stuff, then some of the food security issues and prices would be better. But I think it, you know, when the question is asked of, like, why don't these companies do it, I think it just is much more complicated than that. And don't get me wrong, I do think that there is some of this stuff has been taken to the extreme of like, you know, corporate greed, if you want to call it that, where we're just making ridiculous products, right?

17:15So I guess what I'm trying to say is I don't, I'm not sure that this is like as black and white of an issue as I think people who are writing about it on LinkedIn who are in the industry make it seem. That's a fair point. But if you look at a product that we talked about a few episodes back, that Trix loaded the General Mills product. Yeah, that's the extreme. Totally agree. We do not need that product. We don't need that product. And I would argue that the onus isn't on a consumer to say, okay, well, I'm going to spend a bit more to get a better for you cereal. I think the onus is honestly on conglomerates and corporations like a General Mills to say, okay, we're going to invest in the future of health, invest in the future of our world by making better products and buying and acquiring better for you brands.

17:57But they are doing that. Are they? They do have incubators. They do have innovation arms and they do have those. But many times you see those innovation arms get spun up and then they spin down. So why hasn't Simple Mills been acquired yet? I don't know the answer to that question. Put Mike on the spot there. The answer is probably cost. Cost to acquire Simple Mills and then cost to run it. Cost to integrate it into an entire platform and to have that be the new gold standard for a company. the thing with simple mills and going back to john's point about accessibility and affordability i feel like that brand has gotten to a price point that is accessible for more people than it had been when it launched a few episodes back we talked about ultra premium and expensive cereals and it's understandable why a general mills or kellogg wouldn't buy one of those brands because it's not a great value for them they can make their own products which they're already doing and they just don't see a great future for these products simple mills on the other hand which has a pretty broad portfolio of products and could, I think, integrate pretty nicely into one of these bigger companies.

19:02It's just, I don't know, it's just a little surprising. No, I mean, look, I think there is also just an education component that even consumers who have the financial means to buy better products don't totally understand. And I'll use a bread example again of, you know, there's a bread that I buy from Iggy's, which is a local bakery here in the Boston area. and this is conversation I randomly had when going away on a weekend with another family and they're like they love the taste of the bread but they don't buy it because it goes stale fast and it's like okay but do you know why you know and I think there just is a basic misunderstanding of the trade-offs if you will and that you know quality it's not going to work the same and fresh better for your products in some categories frozen food obviously totally different animal but I don't know.

19:52I mean, I think, again, this is just complicated. It's like one of those things, like asking, I don't know, why don't we all have electric cars or, I don't know, universal healthcare or something like that, right? Oh, yeah. These are good ideas. There's still just a huge disconnect between, like, when we're growing up, between food and the food industry and understanding where our food comes from. And like Craven was saying, like, why does bread go stale? Or, you know, why does tomato taste different when you, like, grow it fresh. I mean, another good example of a brand that is becoming more accessible is like Bonza.

20:24I can buy it on Walmart plus for like really cheap and it gets delivered and that's a better for you pasta. But people don't know that chickpeas are more nutrient dense and they just go with something that's even a little bit cheaper that they're more comfortable with. And people don't know, you know, I guess better or they don't have the education or the resources or access. But look, I mean, I think even the processed foods have gotten worse, right? It's like stupid things. Like if you ever try eating a Twinkie, you know, like a Twinkie from 30 years ago, it's not the same. I mean, not that you should eat either, to be clear.

20:58But yeah, I mean, I think clearly there's some broken stuff there. And, you know, to Jackie's point, I mean, we do need some of these bigger companies or, you know, at least money to be put into them to get to a point where they can have the economies of scale to get the cost to a point where, you know, they are more broadly affordable and available. I mean, if it's in Walmart, great, you know, that's, that's awesome. Some of the innovation I would bet is shrinking sizes, you know, shrinking portions as well, too. So you, you look at, Jackie was talking about hungry man, and you talk about how big was hungry man 10 years ago versus how big are the portions today?

21:36Wasn't that the one that was like a full three pounds of food or something? Yeah, and then you also got like a brownie. It was like a three-course meal. weird dessert that you weren't quite sure what it was? Well, I'll just say this. If General Mills, and I'm going to, I'm not trying to pick on General Mills, but if they look back at one of their most successful investments, that of Annie's, and look where that brand is right now, and consider how many people buy Annie's mac and cheese and some of their gummies and snacks on a regular basis, I think there's real potential with other entrepreneurial brands that we're seeing out there that are doing good and could be good for their portfolios from a financial standpoint and from a health and nutrition standpoint.

22:11So there's my soapbox talk once again here. Again, it's just not as easy as you make it seem. We're a giant conglomerate's going to be able to spin up an innovation arm and then also be able to integrate these into their processes. So it's definitely a commitment and there's a high cost associated with changing all their processes so that they can be better for you. That was Mike's really nice way of saying, You sit there in your chair, in your expensive studio here at BevNet headquarters. You got to bring you back down to earth. You get a makeup guy. You get someone bringing you a coffee. I had to go product guy on it.

22:49And you think that it's just so easy for them to go and buy anything they want at any time and integrate it into their manufacturing and marketing. There's so many good ideas out there, Ray. And you think of them. And the funny thing is when you ask a founder, hey, have you thought of this? They're like, you know, oh, that's a great idea. They'll probably are being really nice to you. And of course they've thought of it, but they also know how, you know, the proverbial sausage is made too. And they know why they haven't done the thing that you suggest, even though it's a great idea on paper. Okay.

23:22I could go, I could go on and on about corporate M &A strategies. I really want what you're talking about to happen, Ray. Yes. Well, thank you for indulging me, everyone. And thanks for everyone who's listening to my soapbox talk here. But what I do want to talk about now is C4. C4 is a brand of energy drinks. Smart energy, I noticed. Yes. You know why it's called this can I have in my hand? I have a guess. Is the C for Cognizant? No, C4 is the name of a brand that is marketed by a company called NutriPolt. And C4 Smart Energy is one of their products here. And where does the smart in smart energy come from, Mike?

24:02Cognizant. It comes from Cognizant. And as we know, Cognizant is a clinically tested nootropic ingredient. Why could one of the four C's be for Cognizant, Ray? That delivers a patented form of citicoline to supply your brain and those of your consumers with the energy it needs to stay sharp. Learn more at Cognizant.com. That's C-O-G-N-I-Z-I-N.com. It is clinically tested and proven that Cognizant sharpens mental focus. if you need a boost in the morning, if you need a boost at Expo West, this is something you'd want to reach for. I'm just saying. Yeah. Yeah. All right. I promised John Craven something special.

24:44I really did. It's better to deliver. This is going to, no, this is going to blow your mind. What? I got some samples. They were delivered to the home base in sunny Brookline, Massachusetts. The home base. I know they should be delivered here, but it just happened. You brought them. But I brought them here for you. It's good. It's two things. Okay. Okay. One of them is a dip. One of them is a snack. But I'm going to give them both to you at the same time. I bet the dip. Can I dip the snack? Yeah, do they go together? The dip is one. Now, Ithaca Hummus, as you all know and love, has come out with two new products.

25:16They have a new jalapeno lime hummus and they have a new French onion. I brought you the French onion. And to use or to dip in the hummus, I have some pretzels. Otz, the well-known maker of pretzels and other snacks. It's got my hot honey. Has launched a new line of products called Mixed Minis. These are four ounce pouches of pretzels that come in three bite-sized shapes. There are waffles, rings, and twists. There's a garlic butter variety. This one has artificial flavors in it. I'm not sure if you can. I was going to say this is like an interesting snack to choose after your last discovery. Right.

25:50And this one, yeah, this one is one made with Mike's Hot Honey. It's done in collaboration with Mike's Hot Honey. Do you want one or both to dip in there? Yeah, which one would go with that dip? I'm going to go with garlic butter. Garlic butter it is. I mean, I love Mike's Hot Honey, but... Garlic butter. I mean, or I could just sample this hummus the way that the Noss guy said, where I just stick my finger in. Don't you do it. I'm leaving if that happens. No, please don't. Please, God, don't. Go for it. Do it. Okay, so... Oh, wow. That looks good. Look at that garlic butter. Your finger in there.