Dive Brief:
- Sovos Brands sold pancake and waffle mix brand Birch Benders and related assets to Hometown Food Company. The terms of the deal were not disclosed.
- Todd Lachman, Sovos president and CEO, said the divestiture will allow the company to focus more on its “core” Rao’s and Noosa Yoghurt brands and create “a more focused business that is better-positioned to drive sustainable sector leading growth.”
- The divestiture comes more than two years after Sovos, which was built on acquisitions, purchased Birch Benders to add to its portfolio of “one-of-a-kind” disruptive brands specializing in premium foods.
Dive Insight:
Sovos has evolved into a fast-growing player in the food space with a portfolio that includes Rao’s sauces, Michael Angelo’s frozen Italian meals and Noosa Yoghurt — all of which have been purchased since the company was founded six years ago. It’s posting double-digit sales growth and has targeted Rao’s as having the potential for $1 billion in net sales in the future.
Sovos’ success has been nearly flawless, with one notable exception.
Birch Benders watched sales tumble following the loss of a major customer. The brand also is seeing additional competition in the slowing keto diet space where it is popular, and a larger-than-expected decline in waffle and pancake consumption following the COVID-19 boom. Sovos wrote down the value of Birch Benders by $42 million last August.
Birch Benders has undoubtedly been a drag on Sovos, and the brand barely got a mention during its November earnings call. It makes sense for the company to focus its time and resources on its core brands with greater growth potential and potentially suss out other potential acquisitions, rather than expending energy to rehabilitate Birch Benders.
To be sure, Birch Benders plays in several still-popular categories, such as health and wellness and natural baking — trends that have grown in importance among consumers since the start of the COVID-19 pandemic. It also has an expanding portfolio beyond waffles and pancakes, including baking mixes, frosting and cookies that could be used as a valuable springboard for growing brand recognition and sales.
Birch Benders might be better positioned for success away from the watchful eyes of Wall Street under the ownership of Hometown Food and its private equity owner Brynwood Partners VIII. Hometown has several popular brands, including Pillsbury shelf-stable baking products, Hungry Jack and Martha White.
Henk Hartong III, Bynwood’s chairman and CEO, said in an interview last year there are factors that make a food or beverage product an appealing acquisition: Lack of sufficient marketing dollars, innovation, investment in production capacity, or attention from a CPG’s sales force because it generates such a small portion of sales. Birch Benders checks many of these boxes.
In a statement announcing the purchase of Birch Benders, Hartong said the acquisition “is complementary to our
existing brand in the space, Arrowhead Mills, and reinforces our commitment to and industry position in the better-for-you category.” Arrowhead, a maker of organic cereals, flours and pancake and waffle mixes, was purchased from Hain Celestial in 2019.
Bynwood, the private equity owner of SunnyD beverages, Buitoni pasta and Juicy Juice, is no stranger to deal-making in food and beverages.
One of its biggest came in 2018 when J. M. Smucker sold the firm its U.S. baking business — including Pillsbury, Martha White, Hungry Jack, White Lily, and Jim Dandy brands — which led to the formation of Hometown Food. Bynwood has successfully reinvigorated and grown several brands, and could use its experience, industry connections and deep bench of executives with ties to food and beverage to do the same with Birch Benders.
