Falfurrias, with first Fund V deal, bets on locally sourced honey amid surging demand

Locally sourced, raw honey is not a product that comes immediately to mind when thinking about hard-charging private equity deals – it’s a bit more communal pot luck and a bit less Aretsky’s Patroon.

But Charlotte, North Carolina-based Falfurrias Capital plans to build a platform around its inaugural investment out of its Fund V, which is a controlling stake in Local Hive Honey. The firm considered acquiring Local Hive Honey as an add-on to its existing platform, Sauer Brands, but changed direction and bought the company as a platform.

“For now, Local Hive will stand on its own, but we will be opportunistic and are actively reviewing opportunities for add-ons to the newly acquired honey brand,” said Chip Johnson, partner at Falfurrias who led the investment. (Falfurrias has another add-on to the Sauer brands that will be announced later this week.)

The firm will work with Local Hive Honey’s management team, led by CEO Tony Landretti, Johnson said.

Local Hive produces 23 varieties of raw and unfiltered honey sourced from local beekeepers across various regions throughout the US. Each honey has its own unique flavor and color based on the region from which it was sourced.

Local Hive Honey, like many American companies, is adjusting to higher prices, as inflation is still lingering but Johnson sees it as a manageable risk going forward.

“We are seeing inflationary pressure across our portfolio, so it is something we are used to and are not too concerned about it in the future,” Johnson said.

Customer demand for sustainable products sourced close to home is driving demand for this type of honey, Johnson said. “Honey is now the leading natural sweetener, eclipsing sugar for the first time, as consumers seek healthier alternatives for their diets,” he said.

“This investment continues our ‘industry first’ method of identifying markets – like packaged foods – with significant and durable growth potential,” said Ken Walker, a partner at Falfurrias, who will join the Local Hive board along with Johnson and adviser Mary-Ann Somers.

Johnson noted that maintaining relationships with local beekeepers that Local Hive has built up is paramount for success.

“We have to be sensitive to and maintain the trust and relationships with the beekeepers, as supply chain is ecological,” Johnson said. “We will support and invest in ESG and build partnerships with beekeepers who follow sound and responsible practices and go about business the right way with the environment in mind.”

Consumers changed their eating habits and behaviors dramatically last year. Despite the pandemic, Local Hive “consistently” outperformed other brands, giving Falfurrias confidence the company can continue to grow in a stronger economy.

The first investment of Fund V is an example of Falfurrias’ industry-first approach and correlates with the long-term, durable growth trends it sees in the packaged food space.

“This is a fast-growing segment of the honey category that’s perfectly aligned with today’s consumer trends favoring natural products that are sourced locally and responsibly,” said Somers, a former Hershey’s and Coca-Cola executive who serves as an adviser to Falfurrias. “Local Hive is extremely well-positioned to capitalize on these shifts in consumer preference and build increased market share.”

Origins

The origins of Local Hive date back to 1924, when LR Rice founded Rice’s Lucky Clover Honey in Greeley, Colorado. The family-owned business spent decades sourcing high-quality raw and unfiltered honey while establishing relationships with local beekeepers across the country.

In 2013 former Pinnacle Foods executive Tony Landretti joined the company in a consultative role, establishing a bold strategic growth plan. Landretti was appointed CEO in 2017, following an investment by Mission Consumer Capital, Centerfield Capital Partners and Plexus Capital, and rebranded as Local Hive, launching a line of distinct honey varieties from across the country influenced by season, location and weather, which gives them each a unique flavor.

Fund V closed at $850 million earlier this month and it was oversubscribed. Fund V will be managed by Marc Oken, chairman at Falfurrias and Ed McMahan, managing partner who both managed fund IV. The firm’s prior flagship fund, Falfurrias Capital Partners IV, totaled $500 million and was raised in 2019. In total, FCP has approximately $1.9 billion under management.

Falfurrias Capital Partners is a private equity investment firm founded in 2006 by Hugh McColl Jr., former chairman and CEO of Bank of America, Oken, former CFO of Bank of America, and McMahan. The firm is focused on acquiring or investing in a diverse portfolio of growth-oriented, mid-market companies.