- Company: Zarbee’s Naturals
- Financial Adviser: Houlihan Lokey
- Legal Adviser: Finn Dixon Herling
WHY THEY WON
- 9.7x multiple and 43% IRR
- Revenue increased 15x over a seven-year hold
- Zarbee’s grew into the No. 1 pediatrician-recommended children’s cough/cold brand
- Added new products, expanded presence across the U.S.
When L Catterton in 2011 acquired a majority of Zarbee’s Naturals, it bet it could build a new growth category that took advantage of long-term consumer trends around brand authenticity, health and wellness, and investing in children’s products.
When it sold the company to Johnson & Johnson Consumer in 2018, after expanding Zarbee’s from a line of honey-based children’s cough syrup into a market-leading provider of natural over-the-counter products, that bet paid off — to the tune of a 9.7x gross multiple and 43 percent IRR.
L Catterton Co-CEO Scott Dahnke said the deal reminded him of a quote from the 1980s TV show “The A-Team”: “I love it when a plan comes together.”
“This is exactly what Zarbee’s is: It’s like the A-Team,” Dahnke said. “You put together great people, where everybody knew what they were going to do, with a fantastic plan, and the plan really came together. It wasn’t without challenges — no investment that one holds and grows for seven years is without challenges — but on the A-Team it wasn’t without challenges either. It’s just a matter of how you overcome them.”
During L Catterton’s hold, Zarbee’s revenue increased 15x to more than $70 million.
L Catterton installed new management, developed new products to complement the cough cures, built trust in the Zarbee’s brand and greatly expanded the distribution of its products.
To build consumer trust, Zarbee’s relied on pediatrician recommendations (becoming the No. 1 recommended cough/cold brand for children under 10), an expanded social-media operation that gathered more than 1.2 million Facebook followers, and word-of-mouth buzz.
“These are parents, and mothers in particular, who are buying the vast majority of Zarbee’s products,” Dahnke said. “They know other mothers with children in the same age group and they trust each other. That word-of-mouth recommendation is worth its weight in gold.”
L Catterton acquired Zarbee’s just a few years after it was founded in 2008. During the firm’s hold, the company grew to 50 employees from four, while bringing on two board members with CEO-level experience at natural-consumer-product brands Burt’s Bees, Seventh Generation and Plum Organics.
While the new management team was essential to growing the business, Zarbee’s also continued to work with its founder, the pediatrician Zak Zarbock, and his vision for the company, Dahnke said.
“The challenge is to keep the founder involved, and keep them energized and keep the ethos of the brand, while bringing on professional management,” Dahnke said. “The challenge is to make sure that, metaphorically speaking, one plus one equals three.”
At the time of the sale, Zarbee’s was the market-share leader in the pediatric cough/cold category, with a meaningful lead on the runner-up, Reckitt Benckiser’s Mucinex.
Zarbee’s expanded distribution across channels nationwide, gaining significant presence at over-the-counter juggernauts like Walmart, Target, CVS, Walgreen, Costco and Whole Foods, as well as a growing e-commerce presence.
During L Catterton’s investment period, Zarbee’s also greatly expanded its product portfolio, expanding from children’s cough products into baby and children’s vitamins, children’s sleep, adult cough and other wellness products.
During the product expansion, children’s liquid cough products went from 100 percent to 40 percent of business.
The investment in Zarbee’s came from L Catterton’s first growth fund, which collected $316 million in 2008. Sorenson Capital was a minority owner of Zarbee’s at the time of the sale.
J&J did not disclose terms of the acquisition.
“The Zarbee’s team has achieved tremendous success in the marketplace and we are excited to be a part of their future growth,” J&J executive Kathy Widmer said at the time of the purchase.