Target: Kettle Foods
Sponsor: Lion Capital
Purchase Price: $320 million
Advisor: Seller: Rothschild
While large conglomerates dominate the bulk of the product on supermarket shelves, private equity has established a toe-hold in the natural foods aisle. The latest organic food company to go to a private equity buyer is potato chip maker Kettle Foods Inc., which was sold to U.K.-based
Buyout shops have been investing in the natural foods space for years.
According to Tim Fallon, president at Oregon-based Kettle Foods, the company was approached with a buyout offer a few months back, which precipitated Kettle’s hiring of Rothschild to test the market. He wouldn’t comment on who participated in the auction, but he noted that Lion was able to distinguish itself because of its track record with branded products.
Roughly half of Lion’s portfolio is made up of well known food products. The firm owns European soft drinks maker Orangina, cereals maker Weetabix, and France’s Materne, a maker of canned fruits and jellies.
Kettle, founded by Cameron Healy, has been making chips since the early Eighties, and from the get go, has played into the organic segment. While the niche was noticeably smaller twenty years ago, it has grown considerably today.
Based on figures reported by the Organic Trade Association, the organic food market reached $14 billion in size last year, representing a 28% jump from just two years prior. Currently, the organic food category makes up roughly 2.5% of all retail food sales.
“People are more concerned with what they’re eating,” Fallon said. “And if you look at the back of our bags, the ingredient statement reads like a recipe,” he added, implying that there are no chemicals or trans fats used in making the chips.
The company is anticipating continued growth alongside the positive trends in the natural and organic foods segment. Kettle also intends to capitalize on Lion’s U.K. presence to help bolster its position internationally. The company already sells its products throughout North America, Western Europe and Asia, but Kettle is counting on Lion to broaden its distribution within those markets.
In addition to relying on natural ingredients, Kettle also distinguishes itself for its exotic flavors, such as cheddar beer and spicy thai. The company, in the coming months, plans to rollout two new flavors, Tuscan three cheese and buffalo blue, both of which came as a result of a people’s choice contest. —K.M.