Spices and Seasonings M&A Update June 2021
Industry players are leveraging acquisitions to gain additional scale, capabilities, and market access. Recent activity underscores an active M&A market driven by healthy investor appetite and valuations.
Headlining corporate M&A activity is the acquisition of private label spices supplier Olde Thompson by Olam International (OSX:O32) (Olam), completed in May 2021. The $950 million cash purchase price values the business at 11.5x and 8.5x EBITDA pre- and post-synergies. The transaction accelerates Olam’s strategy to be a global leader in value-added solutions across its five segments, of which the Spice segment is a pillar. In an interview with Food Navigator, Shekhar Anantharaman,
CEO of Olam Food Ingredients (OFI), called the acquisition “transformational,” “…it hits our core category, it sits in the heart of consumer trends, is driving a channel we want to expand…and it is in an attractive, large growing market.”
The acquisition will make Olam “a very unique, differentiated end-to-end spice solution provider to the U.S.,” Anantharaman said. “Growing our offerings of private-label (branded) solutions is right at the heart of OFI’s strategy—and within that spice is one of the most attractive and growing categories, especially in the U.S. This will enable us to offer consumers a comprehensive range of bold, authentic, natural taste, and flavors with end-to-end traceability.”
California-based Olde Thompson is a former portfolio company of Kainos Capital, which acquired the business in 2018. Olde Thompson is the largest dedicated manufacturer and supplier of private label dry spices and seasonings in North America, according to Kainos, which completed the add-on acquisition of Gel Spice in July 2020, a move that solidified its leading market position and created a bi-coastal manufacturing footprint.
Fragmented & Growing Market Draws Investors
Private equity sponsors have long been proponents of the buy-and-build approach in fragmented markets, and the Spices and Seasonings industry is no exception.
In recent months, private equity sponsors have been involved in a number of acquisitions in the space, including, in 2021, Incline Equity Partners (Starwest Botanicals) in April, Audax Group (Urban Accents) in March, and Frontenac Company (Monterey Bay Spice Company) in January; and in 2020, Norwest Equity Partners (Brinkhoff & Monoson, dba Red Monkey Foods) and Shore Capital Partners
(Old World Spices & Seasonings), both in December, and Fulfurrias Capital Partners (Chicago Custom Foods) in May.
Common elements shared across the companies included differentiated offerings, for example, Starwest in Organics and Botanicals, Monterey Bay in Botanicals, and Red Monkey Foods in Private Label, as well as expanding eCommerce platforms that are benefiting from rapid channel growth. BGL served as the exclusive financial advisor to Starwest Botanicals. See Page 9 for a Case Study on the transaction.
In July 2020, Olde Thompson, previously backed by Kainos Capital, acquired Gel Spice, a move that expanded its national footprint and positioned the company as the largest manufacturer of private label spices in the U.S.
Commenting on its initial investment, Kainos Capital Managing Partner, Andrew Rosen, said, “Our investment in Olde Thompson was driven by our thesis in the growing importance of spices and flavorings as consumers seek bolder taste profiles. After meeting Jeff Shumway, the founder of Olde Thompson, nearly a decade ago, we ultimately partnered in 2018 to pursue our shared vision to grow Olde Thompson into the largest dedicated private label provider of spices and seasonings. We accomplished this by investing in our manufacturing capabilities and customer development resources, and the acquisition of Gel Spice from the Engel family in 2020 helped accelerate this strategy and was instrumental in attracting the interest of a terrific strategic acquiror in Olam.”
San Francisco Equity Partners (SFEP) exited Red Monkey Foods in December 2020 with a sale to Norwest Equity Partners. During its partnership with Red Monkey Foods, SFEP more than tripled revenue and EBITDA, according to the transaction announcement. Contributing to the growth was the synergistic acquisition of specialty salt provider, San Francisco Salt, in 2017, whose brand portfolio includes San Francisco Salt Co., Sherpa Pink, Epsoak, and Minera. Red Monkey has become the market leader in organic store brand spices and seasonings and controls two high-growth salt brands, said SFEP.
Sauer Brands, a portfolio company of Fulfurrias Capital Partners (FCP), acquired Chicago Custom Foods in May 2020, bolstering its seasonings portfolio in the Snack category. CCF is a leader in branded popcorn seasonings with Kernel Season’s, a brand that now has more than 20 popcorn flavors. Commenting on the investment, FCP Partner Chip Johnson, said, “We continue to seek out opportunities to invest in strong, authentic brands with significant growth potential based on shifting consumer preferences and other durable trends.” FCP acquired Sauer in 2019.
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