Latest CPG Deals and Market Insights: Drew Fallon, CEO Iris Finance

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1:16Markets can be like one of two things, basically. You can either be like a very big and like mature and competitive sort of low margin market, or it can be a very like small but emerging growth market. And so like to launch a brand into one of those like hyper competitive mature markets, maybe like a good example is Dr. Squatch and Unilever where Unilever, they own Axe, obviously. Axe was like big, like when I was a kid, like in the 2000s. Then Axe like never appealed anymore. And so there's this entire like new next generation of guys that were born from 2000 probably like on basically when they have no brand serving them.

1:49And so Dr. Squatch like filled that white space. Then Unilever had to buy them because Axe revenues are declining and that's their exposure. And so they have to plug it. So I think identifying areas in emerging markets where big CPG conglomerates don't necessarily have exposure or they have too much exposure that's like been declining are probably like if your goal is to sell the business, of course, which is not everybody's goal. But if it is, then kind of identifying the gaps in the portfolios of the big companies, I think is like an interesting strategy.

2:18Hannah Dittman:Hey, everyone. I'm Hannah Dittman, operations and finance host of the Startup CPG podcast. and today I'm excited to be joined by Drew Fallon from Iris Finance for some CPG market insights. Drew is a strategic finance operator who works closely with consumer brands on everything from financial planning and forecasting to fundraising readiness and long-term growth strategy. As the co-founder and CEO of Iris Finance and former CFO of Mad Rabbit, he brings first-hand experience building and scaling consumer businesses from the inside. Through his work at Iris Finance, he helps founders better understand their numbers, make smarter decisions, and build businesses that are positioned for sustainable growth.

3:01Hannah Dittman:In this episode, we zoom out and look at the broader CPG landscape, covering acquisition activity, valuation trends, investor behavior, and what those signals may mean for founders building today. We also discuss where capital is flowing, what categories are attracting attention, characteristics of companies that successfully create long-term value, and how founders should think about exit potential. Along the way, Drew shares his perspective on the trends and market dynamics he's watching most closely and what they can mean for the future of consumer brands. If you're fundraising, scaling, or simply trying to better understand how investors and acquirers are viewing the market today, this conversation is packed with practical insight and valuable context.

3:43Hannah Dittman:Enjoy!

3:47Hannah Dittman:Hey, everybody. Welcome back to the Startup CPG podcast. This is Hannah, and today I'm here talking CPG market dynamics with Drew Fallon, co-founder of Iris. Drew, welcome to the show. Thanks for having me, Hannah. Thank you for being here. I'm really eager to get your insights and talk all things CPG. Before we dive into the broader conversation, I'd love to kick off with a brief background and your path through consumer and what ultimately led you to Iris. Yeah, for sure. So I've been in this industry for probably like 10 years or so now. So I started a bunch of brands like in college, mostly like beauty and health and wellness companies, and none of them really ever went anywhere.

4:24But there was one company that I met the founders very, very early on is a brand called Mad Rabbit. It's a personal care brand, Mad Rabbit. So I've helped them get going from the very beginning. We were all in college. We graduated in 2019. Mad Rabbit was very much a side project for a couple of years. So I went on and I did investment banking for a few years after school. All the while, Mad Rabbit grew to a point where the three of us really wanted to go full-time. And so I think it was 21, maybe, where I jumped into the full-time operating seat at the beauty brands, spent the better part of five years operating full-time there, and then eventually wanted to start my own thing, which was Iris.

4:58And so Iris as an AI FP &A platform, so basically deploy agents into the finance and operations departments of these consumer brands, food, bad apparel, beauty, personal care, all of the above, to help them make better predictions and run more efficient, more profitable businesses. So on a couple of different sides of the house, I guess now. But yeah, it's been fun.

5:18Hannah Dittman:Yeah, you've seen the world from many different angles. And I think that adds a lot of color and context to your perspective. I feel like nothing like being in the operating seat of an emerging growth brand. I know Mad Rabbit well. Very exciting company and cool that you got to be part of that journey. And I'm sure you have a lot of founder empathy for the companies that you're working with as well. Yeah, that's for sure. Yeah. Having taken a swing and been in the seat yourself. I'd love to dive into some acquisition market landscape dynamics. I know that you're seeing quite a lot through your company and through your observations of the market.

5:52Hannah Dittman:Have you noticed anything in the CPG acquisition landscape right now? How has activity been or how does it compare to maybe past years that you've taken a look? So it's been a few years of like what we sort of call like fireworks, where like these deals that have been happening probably since like the beginning of 25. So like Simple Mills got bought, I think was the first deal of 2025 and then Spindrift. And there was all these like very well-known logos that were going for very, very large prices. And so it kind of has like been giving this illusion for the last 18 or 24 months that like M &A is like super, super hot.

6:26I mean, like it is in like some regards, if you look at sort of like a total dollars deployed perspective, like there's more dollars than ever, but it's really concentrated in kind of these big fireworks headline type deals. And so on a holistic basis, I think it's relatively muted, honestly, but people kind of see like the poppies of the world or whatever else and they get really excited and they think that everything's going to be hunky dory and it's all going to be great. And so broadly speaking, after 2021, when the rate environment really changed, like private equity, I don't want to say stepped out of the marketplace, but it's harder to deploy capital if you're a sponsor with higher rates.

6:59And so that trickles down through the rest of the capital stack. And so the only brands that have been really getting bought for a couple of years now are like truly exceptional companies that have reached critical mass in really important categories. And so I don't mean to say that pessimistically, because I think that the future is exciting, but it tends to like feel a little bit more active than it really has been if you dig into the numbers.

7:20Hannah Dittman:Yeah, no, I think that makes a ton of sense. And I'm glad for the headlines because I feel like it has drummed up a little bit more activity and interest. Like, obviously, we hit the like peak of the bottom of the trough, I guess. Yeah, right. Kind of around 2023 or maybe even a little bit before then. And that was rough times, I think, coming from a seller's market into then a buyer's market. Obviously, the buyers have their choice of the litter and that goes for everything from strategics all the way down to the most early stage investors and trickles through. Yeah, it's a cycle, right? Yeah.

7:52Hannah Dittman:So riding that wave, I'm glad to see SB picked up a little bit onto the upswing and hopefully that continues. And I think there was also the confluence of things. It's hard to ignore, obviously, all of the factors that COVID was playing and retail environments and everything that was going on with such a weird instance. the EBITDA add back instances of COVID and everything that was happening there. So yeah, crazy times. And hopefully we're on the beginning phase of normalizing once again. I think so. I mean, I think the Groon's deal was like a very, very interesting one. I think that one is going to be looked back on as like the first one of like sort of the hyper cycle, because like I think I've written a little bit about this, but I think there's such a massive shift going on in the consumer right now, mostly related around like GLPs and wellness and protein and fiber and all that good stuff.

8:46Like there hasn't been a ton of like VMS style acquisitions, like basically ever, like Haya got sold a couple of years ago, but that was like kind of it. It's like a kid's vitamins company. But then Groon's going for like over a billion dollars is like, I think going to be looks back on. It's like, wow, like we're in for like a five or 10 year cycle of like all these companies that are growing really, really rapidly. And we see a lot of them at iris these are numbers that like are unfathomable honestly like ever and so i think there's going to be a big cohort of brands that end up getting acquired i guess the other comment really quickly is if you consider all the big cpg codes so like keurig dr pepper kraft hines unilever png how you can name it like they're all divesting like everything like kdp is splitting up unilever splitting up nestle has a portfolio review they all have some sort of portfolio review going on and so there's this trend where it's like the consumer is changing so rapidly and these big big companies aren't moving quickly enough to meet those needs.

9:38And so there's a huge cohort of emerging brands that are gobbling that share that are going to end up becoming the next incumbents, so to say. So I think it's a really exciting time.

9:46Hannah Dittman:Yeah, no, I think great perspective. And even when you benchmark like an Ollie versus a Grooms and you think about just time to scale and what exit potential was like between the two of them, the Grooms story is exceptional and hopefully an indicator, not just of an outlier situation, but maybe where markets are trending once again and the portfolio shifts like you're talking about. Diving into categories a little bit more fulsomely, like obviously we're talking BMS. Are there any categories or sectors that you are seeing the most activity in? I think obviously from my seat, it seems like Food & Bev has gotten quite a lot of the love and attention, but curious your thoughts.

10:25So Food & Bev is always, I mean, it's the biggest markets with the most brands with the most share like food and bev is always the biggest like it's like when i look at my like category charts it's like food and bev is like up here and like the next one is like apparel or something and apparel is like a bunch of like dog like bottom feeder like 3x even a brands because like it's been a rough stretch for those guys but it's by the size of the markets is usually like the whole deal activity so food and bev is always the most apparel is probably the second and then shift totally down to vms and VMS is usually the lowest.

10:54And that's why it's interesting that like some of these VMS companies are growing so quickly is because the markets are going to get big enough that like the strategics are actually going to start acquiring the assets. So food to bed is yeah, it's always the biggest on a sheer like count perspective. I think beauty had a little bit of a lull between 22 and 24 since the ASOP deal that was like the big splash and then K18 as well and it went quiet for a little bit but there's been a little bit more kind of in that category so i think people are really excited about korean beauty specifically there's going to be a couple splashes there probably in the next 12 months and then broadly wellness so i don't want to keep talking about supplements but supplements you're going to see some splashes there like electrolytes like there's been such an insane rise in electrolytes like there's going to be some tippers in that category like element like what are those guys doing they're like a trillion dollar company it's like they got to go public or something at some point.

11:47There's like signs of life everywhere. I'm particularly excited about the VMS and the duty space. And then food and bed is always going to be the most active.

11:53Hannah Dittman:Yeah. When you're thinking from the perspective of an earlier or emerging stage brand founder, what takeaways or things can I extrapolate from this later market information that might be informative for an earlier stage business? I think it's like all about white space, honestly. And so like these markets that are like emerging and like being created so markets can be like one of two things basically you can either be like a very big and like mature and competitive sort of low margin market or it can be a very like small but emerging growth market and so like to launch a brand into one of those like hyper competitive mature markets so think of things like packaging there's a reason that nobody launches like water bottle well i guess sometimes they do but like going into like the water category is like the craziest move ever because it's like been commoditized forever and so it's a really really big market but like you're competing on price and you don't have the scale and it's kind of an uphill battle and so the question becomes where are like the actual opportunities it's where people like aren't paying as much attention and it's in sort of those higher growth like everyone's been talking about fiber this whole time it seems so obvious that it's like not going to be true but you kind of have to just like look for these different categories and so i think maybe like a good example is dr squatch and unilever where unilever they own axe obviously but But then Axe like never appealed.

13:09Axe was like big, like when I was a kid, like in the 2000s. Then Axe like never appealed anymore. And so there's this entire like new next generation of guys that were born from 2000, probably like on basically when they have no brand serving them. And so Dr. Squatch like filled that white space. Then you never had to buy them because Axe revenues are declining and that's their exposure. And so they have to plug it. So I think identifying areas in emerging markets where big CPG conglomerates don't necessarily have exposure or they have too much exposure that's like been declining or probably like if your goal is to sell the business, of course, which is not everybody's goal.

13:43But if it is, then kind of identifying the gaps in the portfolios of the big companies, I think, is like an interesting strategy.

13:49Hannah Dittman:Yeah, great point. And I think to dovetail off that point a little bit, too, there's also like the competitive nature within the strategic portfolios as well. There's like the portfolios on their own of the big conglomerates, but then And there's also the competitive edge like P &G looking at Unilever and comparing and contrasting against where they might be getting the edge amongst their competitive set that can drive a little bit of deal activity or interest as well. Yeah, and just paying attention to like where the puck is going to. So like Unilever, for example, which is like maybe the most active like buyer, like they've like completely shed everything that like isn't basically like beauty and wellness.

14:28Like they divested a$10 billion ice cream division. I forget what he calls it. He calls it like the action plan of 2030 or something, the CEO. And it's like they're focused on all of those types of things. And so Grooms happens to align very nicely with that transformation, with that thesis. And so literally, if you listen to some of the earnings calls of these companies, they'll tell you point blank exactly what they're looking for, like what they want.

14:47Hannah Dittman:Yeah. And I feel like they always have their strategic plans, like their five-year plan essentially of where they're trying to drive their business. And retailers too, for that matter. It kind of all syncs up and aligned. It's like the mafia behind the closed doors. Yeah, honestly. Plotting the future. Going into a little bit more maybe of the numerical side, how have valuations trended and maybe the stage of company at exit trended? I think those two things can inform what goes on in earlier stage deals a little bit, obviously, because holding periods are being taken into consideration by investors and also future fundraising evaluation marks are also being taken into consideration at the earlier stages.

15:26Yes. On a multiple perspective. so like my mind goes back to ghost which was acquired by katie key in october of 23 and it was like a 1.6 billion dollar valuation or whatever it was a three point change sort of sales multiple after like 22 23 and that was the end of 23 like that was kind of like the first like big splash like the we're back moment almost and then like poppy and alani knew went for premiums after that so they traded at higher exit multiples and so i think you've seen a little bit of expansion on an exit multiple basis since then, but not too much. It's highly category dependent, highly asset dependent.

16:01Like Not Your Mother's was like a 12X EBITDA for like a$70 million EBITDA business that was growing like right back. So they ended up exiting for like a multiple that would appear probably low, but it's hard to triangulate all these things. But I would say in general, like multiples are a little bit higher off the top of two years ago. And then on the question of sort of like, where are they at when they exit? I think the bar has just gone up so much from a scale perspective. given like especially in food and beverage. I mean, it feels like you have to be doing$500 million in revenue to get like a real multiple from a real buyer, which is like asinine number.

16:35Hannah Dittman:Isn't that crazy? I know the scale expectations at exit just vary so much by category. And the like high turn, low MSRP, food and bev expectations, when you think the volumes that those companies have to be doing, the unit volumes it's staggering it's crazy yeah yeah good point yeah the units because it's like they have some of the lowest msrp and the highest exit like watermark scale expectations and i'm just like it's like a beyond proof of concept to be able to get acquired in some of those categories seriously it's crazy i think like pretty much the minimum i think like people used to say like at 50 million, you are like getting interesting to strategics.

17:23But like back when we were running Mad Rabbit, they were like, yeah, like get to 50 and like then people are probably going to start poking around at you. I feel like that number is like at least 100 at this point. Or it's not like 100 of trailing, at least like in the next 12 months, like you have to be drawing a line to that 100.

17:36Hannah Dittman:Yeah. And I think that makes a lot of sense because earlier days people were building out their portfolio. I think especially in beauty and personal care, that was like a lot of quick grabs to fill out portfolios there was like so many emerging brands popping up at once it was like a big cohort wave that happened all at the same time and I think as portfolios get a little bit more saturated and maybe some of the exit potential of some of those didn't work out exactly the way that they thought I think appetite might move downstream but I think it's so category dependent also yeah like I think maybe there still is interest in the beauty personal care space a little earlier if all the other fundamentals are looking really attractive?

18:16Yeah, beauty maybe a little bit earlier. Yeah.

18:18Hannah Dittman:Yeah. I think it's a signal of scale. I'm actually so surprised about VMS. That's the one that surprises me the most because the margin profiles of those businesses are the sexiest and the recurring revenue is typically very high. Like the fundamentals of those brands is normally very attractive. And I think the gap there might have just been there wasn't a lot of branded plays. And I do think that acquirers are typically looking for branded lifestyle, if you will, businesses and a lot less commoditized goods, even if the business profiles make a lot of sense from a financial perspective. So I do think that probably comes into play a little bit.

19:00Hannah Dittman:And at what scale do you need to say that you've attracted enough of a customer base to qualify for that? I think it's also hard. Like there's the inverse problem where you don't want to get too big. and I think a lot of people fall into that bucket sometimes too that have been very successful and it's almost like what's the path forward there's like a very sweet spot window where you can fill the need and that's like some of the work that we do with Iris because like we have such a good advantage I mean we have 200 brands at this point and we're running like all their models and so we kind of like know where the sweet spot is and like there's people that come to us and they're Like I did 30 million last year and I'm going to do 100 million this year.

19:38And I'm like, why? Like, can you explain to me what the benefit is? And they go, oh, well, I'm going to sell for 5x sales. And so I'll be worth 500 million. And I'm like, well, your unit economics have been degrading for 12 months in a row. And so nobody's going to buy you actually, by the way, if you continue to use the Chad scale that way. And so like, I think the founders in this industry, they're not like finance people, generally speaking, they're like very creative or like product oriented people. And this is like why I got into like content creation is because I think finance people generally, they try to make things like more complicated than they probably need to be just to like confuse you into like paying them basically.

20:13Seem important. Yeah, yeah. It's not like really that complicated. And like when you break it down, it's very easy to understand in many cases. But I think there is like bad information out there. And like, I'm like a little bit of a perpetrator of this where it's like when people are talking about sales multiples, specifically like a sales multiple is just like a proxy for any bit of multiple. Like that's all it really is. But people like don't tend to think that. And so they think that only sales matters. And so I'm just going to scale my sales and I don't care about the integrity of my business at a fundamental level.

20:42So I think there's still some work to do for the industry. But I think the other sort of thing at play here is that after the quiddity supernova, whatever, of 21, people got a lot more disciplined in how they ran their businesses. And this is the kind of shift that's going to take 10 years. When I first started, it was like nobody knew what a contribution margin was. Like there are still people who like don't even know what a contribution margin is. And it's like the only thing that matters.

21:06Hannah Dittman:Yeah, I think you definitely hear investors beating that drum on profitability quite a bit. I don't think it's just the founders that fell into that trap. I think a lot of investors fell into the trap of profitability not mattering as well. And I think if you looked back at like earlier exits, especially in certain categories, the profitability didn't matter as much all the time to acquirers because their North Star was on different competencies that they were trying to get. The get of a younger customer base was more important than the operational excellence, especially if you really think a big conglomerate is purchasing something like a small emerging revenue, maybe it's like 30 million in revenue and not profitable or break even, but they're acquiring a huge customer base.