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Welcome to the Community Call Podcast.
I am Melissa Travers, Director of Community here at BevNET & NOSH, here with my co-host, Sarah Casagrande, Principal and Sales Advisor at Generation CPG.
Sarah, the last time you were here, you were coming up on a dry January.
We're almost half the way through January.
What can you tell us?
It's been amazing.
I've done a dry January, I think, every January for the last five years, something like that, and sometimes I go beyond that.
I feel so good that I keep going.
And then it's like Expo West, right?
And I'm like, oh man, I'm going to have a cocktail.
But it feels really good.
There are so many new options now that didn't exist even a couple years ago, so it's easier than ever.
I've tried a lot of new beverages.
So Recess, I've tried a bunch of their new flavors.
For Recess, was it the Magnesium?
I love that.
Yeah, me too.
They're really good.
I just ordered a brand called Tripp.
Have you tried their products?
They have a Magnesium one too, so I have not tried that before.
That's coming in.
The Lapos Negroni.
So am I saying that right?
Is that the name of it?
That's how I say it.
Okay.
That was really good.
We have some new products here to try today.
But I've also done a lot of my turmeric, lemon, seltzer water.
You can make your own cocktail pretty easily.
And I don't know, I have more energy, my sleep is better.
That's really important.
There is, I know that we've talked a little bit about women's health, and we did a community call on women's health, especially later stage women's health.
And there's this doctor, Dr.
Mary Claire, whose anti-inflammatory diet I am still following.
But she has the, she says this thing where she says, if you're choosing to drink, you're choosing not to sleep.
And every time I drink too much, I wake up in like the middle of the night at 1 a.m.
with her words reverberating through my head.
Melissa, if you're choosing to drink, you're choosing not to sleep.
She's right.
But it feels really good.
You should try it next year.
Or you know what?
You could start now.
It's not too late.
Hey, listen, I'm fine.
I do a dry week except for Friday and Saturdays.
That's really good.
I mean, I'm not going to pressure you, but I'm just saying like it is easier than ever to do a dry January.
You know, I know, and everyone loves their dry Januaries, and I'm so happy for you, and I'm so glad that people do them.
And I'm so glad there are all of these alternatives because I totally take advantage of the alternatives during the week.
You get home.
It's so nice to treat yourself to something a little bit special.
But I just love having a cocktail on a Friday and a Saturday night, and I don't see why I should give it up.
I mean, I do, too.
And I'm going to go back to that at some point.
But for right now, it's like a nice pause.
We went to so many holiday parties.
We did a lot of socializing, and I found myself definitely having more than one cocktail at those events, and that didn't feel good.
Well, you look like you have a special glow to you.
Perhaps your dry January has been contributing to that.
Well, Sarah, I have in front of me here what is maybe the most delicious Bloody Mary mix I've ever tasted.
And although you can certainly add vodka, tequila, whatever you want to this, this would be the perfect thing to have during a dry January if you want something special and delicious that reminds you of alcohol but isn't actually alcohol.
Yep, that's why I brought it in.
I was surprised.
I've tried a lot of Bloody Mary mixes over the years.
I was a bartender for a period of time after college, so I've certainly made my share of Bloody Marys.
This is the best one I've ever had.
And you tried it, right?
It's so good.
You know what I think?
Hold on.
I'm going to take another sip.
I actually had one of these the other day, too, during the day.
I put the ice in it, and it, again, I'm doing a dry January, but I was like, it's almost like I'm drinking a Bloody Mary.
I don't miss the alcohol.
I'm drinking it just because it tastes that good.
It's very satisfying because of the spice that's involved.
They get the horseradish just right, and there is nothing like the right amount of horseradish in a Bloody Mary.
And they also have, I mean, look at this.
They've got garlic, molasses, anchovies, chili pepper extract.
I think the balance of flavors they have here, it's very satisfying.
And I think if you're looking for, like if I was looking for a snack or something, but maybe wasn't super hungry and just wanted something to like tide me over until dinner, this would be like the perfect dual purpose beverage.
But it kind of is like a snack too.
It's like a V8 kind of, right?
Like I wish it would be really cool if they put that in a can.
The name of the brand is Dude Wow, and you said they're sold in Hannaford?
They are, yep, Hannaford.
Are they local to New England?
No, out of Florida.
Oh, interesting.
Yeah, this is a super, super tasty mix.
That would totally hit all the buttons for me if I were doing a dry January.
And like I'm not doing a dry January, but I do like to drink non-alcoholic things across the week.
One of the things that I took home was a product called Wilderton Apertivo.
It's from Oregon, and it's very bitter, which for me like hits.
That's like I'm always looking for something bitter to feel like I'm having a cocktail or like I'm having a special drink.
But I've also been loving just Peychaud's bitters.
Oh, I haven't I haven't even thought of that.
That's genius.
With lime and soda.
Like if I go out to eat and I don't want to drink, I just order that.
And at home, it's really nice and you have all the ingredients.
You know what the other thing I've been drinking is?
Green tea.
Yeah, there's caffeine in that though.
Like you don't want to drink it, right?
There's caffeine in it.
I mean, for me, it's not so much that I feel like it revs me up, but I started drinking it because my sister-in-law, she's almost 50 and I asked you how old you thought she was and you said 35.
So everything this woman does, I do.
Like if she's doing it, I'm doing it.
And she mentioned she was drinking green tea and that it can sort of curb your appetite.
So I looked into it a little bit.
And of course, caffeine helps curb your appetite.
But apparently green tea also has catechins.
And catechins, I guess it's an antioxidant.
It can also regulate blood pressure and lower your risk of neurological disorders.
But I swear, like I drink a little green tea around, I don't know, like two o'clock or something.
And I feel like it resets my, I don't know what it is, but I can make it till dinner and not feel like I need to eat in between.
All right.
Do you have any green tea upstairs?
I might need to go get some.
Yeah, I actually got a bunch of loose green tea from a company called Upton Tea Imports, which happens to be in my town of Holliston, Massachusetts.
But they have an amazing array of teas, green tea, black tea, any kind of tea you could ever think of.
And I order it loose and I have a little strainer thing.
So I'll make you a cup of green tea when we go upstairs.
Thank you.
Yeah, my pleasure.
Well, you know, you, me, and the rest of the beverage industry, we are all totally focused on non-alcoholic this month because it is dry January.
And as a matter of fact, I just saw Marty Caballero, our editor at BevNET, he posted a link to a new product from WhistlePig in our Slack community.
If everybody out there, if you're not in our Slack channel, you should totally join us, slack.bevnet.com.
You can reach all of us there and you can read great links like the one that Marty posted in Slack.
So WhistlePig has a rye non-whiskey that they've come out with.
It has adaptogens, Cordyceps, Damiana, and Shisandra berry, which I thought was super interesting coming from WhistlePig.
Yeah.
I would love to get my hands on that and try some of it because if they're non-alc is as good as they're alc, then...
Yeah.
I want to try it as well.
Let's get right the heck over there and try it.
Let's do it.
Sarah, I see you sitting over there with a delicious looking beverage.
What do you have over there?
This is Better Than Booze.
They're Rosemary Grapefruit Paloma, a riff on tequila.
The tequila Paloma, which is one of my favorite cocktails.
The Paloma, right?
It's so good.
The Paloma is just...
It's great.
I order that a lot at restaurants, but this is very, very good.
I don't know why I haven't tried it before.
16 grams of sugar, 70 calories, really pretty packaging.
It's almost unclear when I'm looking at it that it doesn't have alcohol in it.
I mean, besides the little section here that says better than booze, but it looks like a regular cocktail.
And I think that's what we're seeing in a lot of these is it's almost hard to tell what's real and what's booze free.
And Sarah, that actually relates to a question that I have for you about the non-alcohol category.
How are you seeing different retailers accept submissions for non-alcoholic products?
Do they typically have their own review calendar?
Where are you seeing the products?
Merchandise?
How do you see that playing out?
Great question.
It's changed so much just in a couple of years.
Like two years ago, I don't think I saw any non-alcoholic category reviews.
It was like if you had a non-alcoholic product, you were either submitting for RTD beverage, right?
Or maybe even like beer or wine to kind of sneak in there.
Now, I'm seeing it as a category all by itself.
Many retailers have it on their published category review cycle.
It says like non-alcoholic, sometimes it'll even say like non-alcoholic beer, right?
And then there's another one for non-alcoholic canned cocktails.
So it's really evolved and it will continue to evolve.
Sometimes retailers put them in a separate standalone area in the store.
Other times, it's integrated in where the wines and other cocktails are.
And I was thinking about this.
For some people, right?
Maybe they, people who have embarked on Dry January because they do have like a serious alcohol problem, they might not want to be shopping.
They don't want to go next to the real whiskey or the real wine and other things.
So there's that tactic, right?
Where it's almost triggering for them to go in there.
But it's also like a lot of people like for myself, you know, any time I go into the store and obviously I'm a different type of consumer because I'm in the business and I kind of know where to find things.
But I'm looking for the signage to tell me where to find non-alcoholic beverages and options.
I've been to Shoeby's.
It's so great there.
So I think it depends on the retailer.
Sometimes there will be a review that says non-alcoholic spirits.
Other times it's a little bit more nebulous, right?
It'll show the RTD cooler.
And you don't always know, for example, this Better Than Booze, the item that I mentioned, this looks like a cocktail.
This might not work in that cooler with spin drift or kombucha.
This might in that section belong more with the wine and spirits.
It just really varies.
Something like this, the Aya that I have, this is a sparkling turmeric blend, lime and ginger.
This is a little bit more versatile, right?
So this could go in that grab and go set where other sparkling beverages are sold, or also in that alternative cocktail set, whatever we're calling it.
I could also see that Better Than Booze Merchandised in the functional beverage set, which brings me to my next question for you.
So many of the non-alch brands out there, and the ones that we see come through our office all the time, are not only positioned as an alcohol alternative, but they also have functional benefits, whether it's mushrooms or schizandra berry or whatever it is.
So if you're a non-alch brand, do you apply for both the functional beverage review and the non-alch?
If there's only functional beverages listed on the category review cycle, do you just apply for that one?
So I guess what I would recommend is you as the brand, do your research ahead of time.
Visit the store, see what the sets look like before.
It's really hard sometimes just based on the naming convention to know.
Publix does this.
They have a review called New Age Beverage.
Now, I've been to Publix, right?
They're great.
They're in Florida, but I live in Massachusetts.
And until I am able to go to Florida, see a store and figure out what's in that New Age Beverage set, I'm not sure if that's the right fit for me.
So do your research, try to get a sense of what other products are merchandise in the set that you're reviewing for.
But then it's also like you want to decide, you know your brand the best, right?
You know where you're going to sell.
Try for the, if you have multiple opportunities on a category review, like let's say there is one that is sparkling beverage, one that's coming up that is non-alcoholic, and then one that's functional beverage.
You might start with your preference first, but maybe give it a try at all three.
It's always good to get your product in front of multiple buyers.
So here's another question for you.
So if you have all three of those categories, and let's say your product would fit in to any of them, if you see one that comes up the earliest, should you apply for that one so the buyers get their eyes on your product?
And even if they pass you up for that first review, they've still seen you for the next two?
Depends on the situation, but yes, I think that that is usually a good move.
Again, you want to try to get information from your buyer or your broker, right?
Somebody else that can tell you, all right, this is what that buyer is looking for in the set, or this is like the information that the buyer has shared already.
Sometimes it's hard to get that.
Other times, especially if you have a broker engaged, you can kind of direct them like, hey, can you tell me about the Wegmans buyer and what changes they're going to be making to their set coming up if that's a review that's on the horizon?
And I do want to say that that advice that you just gave for people to go to the store and take a look and see how they've set their store up is so smart.
And it seems obvious, but even if you're already aware of what all the markets in your area are, because you have been to them, you may not have been to Shoebies if you live in California.
So like if you can have a friend go and snap photos or take a video or something, that's such good advice.
And I think that a lot of times that step actually gets overlooked, which could cost you landing on a shelf.
Exactly.
You have to do your homework.
And you can tell so much just from walking the aisles.
And even if you can't get the buyer, right, buyers are really busy.
It's hard to always get input from the buyer, but you can visit the stores and ask people that are working there, ask the cashiers, like, does this item sell well?
Again, like it depends on who you're talking to.
I'm pretty chatty, so I usually end up in deep conversation with some of the folks on the floor.
And why don't you get along with your mother-in-law?
That only happened once, but...
Well, it certainly looks like the Wild West to me, and I applaud all of the beverage brands out there who are living in the non-ALC space because it certainly comes with its challenges, but that also means there's plenty of opportunity as well.
Running a food or beverage brand comes with its challenges, and securing funding is one of the most pressing in this capital-intensive industry.
In this episode of Community Call, I sit down with BevNET's Editor-in-Chief, Jeff Kleinman, to discuss the current state of brand investment.
We explore the climate for acquisitions and investments, how emerging brands can strategically position themselves for funding based on the trends we've observed in 2024, and the key indicators that will help us anticipate what might happen next.
Please enjoy.
Hello.
Thank you for joining us.
I am Melissa Travers, Director of Community here at BevNET & NOSH, welcoming you to Community Call.
You can join our Slack community at slack.bevnet.com to reach all of us here at NOSH and BevNET.
You can also listen to Community Call as a podcast on your listening platform of choice, and you can watch a video recording of this show at bevnet.com/communitycall.
Today on Community Call, we're thrilled to welcome Jeff Kleinman, BevNET's very own editor-in-chief.
He is going to be talking about the current state of investment in CPG and what might be in store for 2025.
While M&A activity has been slower than it had been for the last five years or so, it seems to be picking up a little bit.
We're seeing signs of resurgence with recent acquisitions and investments.
But what does this mean for the future, and how can emerging brands position themselves to catch the attention of investors?
We're going to tackle these questions with Jeff today on Community Call.
Jeff, thanks so much for joining us today.
This is such a pleasure.
It is a great pleasure to be with you today.
You must be right in the thick of putting the final touches on NOSH Live, BevNET Live, and BrewBound Live.
And there is investment.
We're going to have investors at the show as well, right?
Yeah, there'll be a good number of investors, and we'll be talking to mostly people at the venture stage.
And also, there's usually a couple of folks from the larger strategics.
I don't think we're having any of them on stage this time, but they are certainly walking around, the folks from Pepsi and KDP and Coke.
But I think that for the most part, they're right now there to dole out advice and check the playing field more than anything else.
Well, certainly knowing that those folks are going to be walking the floors of our events means that brands want to know as much as they can about what's going on in the investment world.
Let's just start off.
Are things actually better?
We've seen a lot of news in the M&A space, but what do you think?
Are things on an upwards trajectory?
I think they're not, unfortunately.
And I just want to clarify this by saying, at the mergers and acquisitions level, you're talking mostly about big brands buying slightly less big brands.
There was a shift, and I write about this in a story that's going to be appearing the next day or two.
There's been a shift over the past couple of years from the big soda companies, the big food companies wanting to get in early, drop some development money into brands that are really just starting out, brands that are sub, call it 20 million in revenue, and foster them, incubate them, until they buy them, often at prices well below a billion dollars, you know, 100 million, 200 million.
What they found is that when you make these acquisitions, often the host rejects the organ.
It just doesn't fit in.
It's not able to adapt to the distribution or to the sales process particularly well until there's something that really catches hold.
You know, you look at Honest Tea, for example, which was one of the first deals that was done.
Yes, they were able to find something new in Honest Kids, and that fulfilled a need for the brand, but there were a lot of competing brands in the tea space at Coca-Cola, and they just found that they couldn't spend a lot of time trying to develop that particular product.
And so it kind of went away, and we've seen what's happened since then.
But I think the larger point is that over the past five years or so, the CEOs of these big companies have started to really look to larger scale M&A, to $300, $500 million revenue companies as the ones that they want to scoop up and buy.
Maybe a little bit smaller at the food level because there just aren't as many billion dollar brands at that level, simply because of terms.
But again, they're not doing what we call corporate venturing as much any.
You mentioned the host rejecting the organ.
What do you know about NUSA being acquired by Lakeview from Campbell's?
Campbell's brought Rayo's, and you have to think about this.
Campbell's doesn't do a lot in the dairy space.
You know, and that was a brand that was rolled up with Rayo's and with Michelangelo's.
And so it really wasn't in Campbell's best interest to hang on to this thing.
From the very start, I believe people were like, what are you going to do with the yogurt, Campbell's?
And they found a private equity firm that could pick it up.
It's still a good brand.
There's been a lot of yogurt sell off lately from other brands, from other big companies like General Mills.
But the idea is that the big companies are trying to double down on the things that they do really well, as opposed to just being in as many areas as possible at once.
And you don't necessarily have a dedicated sales force, if you're Campbell's, to hit that dairy aisle.
I think they found the same issue with Bold House when they had that is, you know, there was this discussion of a whole store perimeter strategy for Campbell's that just they ended up not loving it and moved away from it.
So certainly Danone offered LifeWay a large sum of money just recently.
That probably makes a lot more sense than, say, Campbell's buying NUSA.
It does.
I mean, look, Danone already owns a big chunk of LifeWay.
So, you know, there's, it seems to me like a sort of not knowing the internal workings of LifeWay and Campbell's, but knowing what we're seeing from a legal standpoint, it seems to me almost like a mercy, a mission of mercy that offer to LifeWay to try and get that sale taken care of so that the family can stop fighting.
Obviously, you know, Julie Smoljanski, who is, you know, just a brilliant operator in her own right, has her own feelings about the valuation of LifeWay.
And I think that's an odd example for the M&A situation, for the M&A, for the status of M&A overall, just given the amount of internal ranker at that company.
But in terms of alignment with Denon's core competency, absolutely, it makes sense, you know.
Having cold case dairy items is their stock in trade.
We have so many emerging brands in our audience.
I mean, many that are below 20 or even 10 million in revenue a year.
Which investment entities would you say present the most amount of opportunity for CPG brands, but especially emerging CPG brands who are most likely looking for money just to keep the lights on or do a production run for a new account or something like that?
Well, you know, part of it is, I don't think you want to be in a situation, and it's very simple for me to say this, or even simple for an investor to say it.
You don't want to be in a position where your next run is dependent on taking in extra capital.
You want to be in a position where you have enough, what they call, working capital, that you're able to pay for the things that you need to buy, either through your just general cash flow or through some debt financing.
If you have to give up a big chunk of the company every time you want to, you know, you want to make more stuff, you're soon going to find that you own very little of it, and you're never really balanced out.
Now, that's sort of simplistic.
I think people looking to start up are often just looking for friends and, you know, what they call friends and family rounds, angels, folks who are willing to take a chance on them as a person or their idea, and they should just be building small, and looking for ways that they can create a track record that will enable them to get bigger.
And that track record is often the kind of thing that will let them access a line of capital, a lending line of capital, you know, a line of credit that allows them to do these things to do another run, to expand a bit.
It's something that can be tucked into their operating expenses rather than having to give away a lot of the company.
So, many of these brands start on friends and family.
And if you can, I think the thinking right now is you want to be able to stay, to stay as close to cash positive as possible because it allows you to be a better lending risk.
It shows you have control over your finances.
And it just makes you more stable.
And no one wants to be spending time worrying about whether finance is going to come through so you can pay your staff, or whether finance is going to come through so you can buy cans.
As money has come in to some brands over the years, I think investors have felt burned because they have, by putting capital in, they've sort of encouraged brands to grow maybe beyond what they should.
Everyone feels like they can get to this massive kind of, you know, they call it the hockey stick, but this turn toward, you know, massive growth, and often, you're just doing one huge run for massive growth, and you might not be able to follow through.
You're just talking about how brands need to stay as close to profitable as they possibly can.
And, you know, I feel like I've heard the word scrappy and lean and mean more in the last, you know, five years than I certainly had before.
Are there any interesting ways you're seeing brands doing without investment capital and being more lean and mean and creative in the way they're keeping the lights on?
Well, so what I think is interesting is, a CEO I was talking to recently described a lean and mean to me very clearly.
He said, you know, it's one less layer of employees than you might assume you have.
So, you know, that would mean that you're dealing with a lot of, what's it called, partial company officers, but mostly it means that you got fewer sales guys, you got fewer marketing guys, and that you were making do with a smaller head count in those places while you're growing, because as, think about it, as you layer down, you're adding hundreds and hundreds of thousands of dollars to your, you know, every two week outlay.
And if, you know, certainly you want to hire for growth, but it's hard to have all those troops sitting around.
There are so many fractional organizations that offer everything from, you know, operations to sales to marketing.
Would you, do you think that investors might look favorably upon businesses that use those options as opposed to hiring internally for those kind of traditional key roles?
I don't know that it's necessarily because the investors think it's a good idea.
It's more, what's a good idea for your business?
So, you know, you may be a marketing-heavy business, or one that, you know, that does a lot online and sells a lot online.
That's going to require more of an investment in that kind of employee.
I think that the biggest place that you see it is in those kind of personnel-heavy areas like sales and marketing.
So, if you can, you know, if you have a good head of sales, maybe that's enough, you know, until you can sort of scale up below them.
All of the money from investors has to come from somewhere.
Where is the funding for investment coming from now?
And how has that changed?
We're sort of exiting a high inflationary period.
The political climate has changed.
Where was the money coming from?
And how do you see that changing in 2025?
You know, and that's another part of the slowdown and in investment in these smaller brands, is it's not just that the brands haven't been able to access capital.
It's that for a few years now, the funds themselves haven't been able to access capital.
The funds, you know, tend to get their money from high-net-worth individuals, from institutions like pension funds or universities or, you know, other corporations or even other funds.
And they've been sitting in this environment where, look, let's face it, investing in consumer brands can be kind of risky.
It can have a really good return, but it can be risky.
And when you have the opportunity, if you're someone who might invest in these funds, to instead put it in 5%, 6% return on capital from just having it sitting in savings, it can sometimes, it has slowed down the number of funds that are able to close and start investing.
Now, that doesn't mean that it stops altogether, right?
You have, you know, sort of special purpose vehicles where you'll do an investment and kind of shop it back out to potential limited partners until you've filled that round out.
You know, but it's one of these sort of snowball effects.
The big funds, the big pools of capital that put money into smaller funds often have caveats as to where their money can go.
And a few years ago, the stock market was not where it is now.
And so a lot of them had to rebalance that capital.
So they basically moved out of alternative investments out of the venture capital space, put that money in the stock market.
The stock market continues to go up.
So maybe that money goes back out into alternative investment.
There have been all kinds of weird things that have affected the ability of venture capital to deploy money into consumer in the past few years.
There was a couple of years ago, there was talk about crypto money leaving the VC space because people wanted to take all this money they were making in Bitcoin and stuff.
And sort of wash it back through venture capital and investment in consumer.
So I mean, you never know where it's coming from.
And it's certainly a smaller sector than like tech investing.
So it's a special, hardy breed.
If inflation ticks down into 2025, should we expect that we would see more capital freed up to invest in businesses like food and beverage CPG brands?
The higher interest rates are, the worse it is for brands, not just from an investment standpoint, but also from a venture lending standpoint.
So the funds also borrow money to finish rounds.
And the investors themselves, or I'm sorry, the brands themselves often borrow money when they get investment.
If you have money coming in, and then you can amplify it with loans that help pay off the cost of your growth, it makes sense.
And so the higher the interest rate is, you know, you sort of hit it, you're hit from both sides.
I think investors are still feeling, you know, they say they're still feeling burned and like, I don't know, how bad should you feel for a burned investor, right?
I think I'll be able to sleep.
Yeah, but, you know, this idea that, you know, well, we got burned on the amount of risk we were willing to take on these brands.
You know, if they'd invested less, if they'd been choosier, if they hadn't sort of succumbed to the big rush to invest in some of these companies that may not have been ready for it, they would probably have, you know, kept their hand off the side of the pot a little bit better.
But the issue is still there, that they felt like valuations went way up toward the end of the last decade.
And in order to get a deal done, you had to pay a lot.
And that there was what they called dumb money, you know, sort of amateur money, or just people who had money that they wanted to invest in, in food and beverage companies, coming in and maybe making it harder for them to do the deals that that sort of veteran consumer investors who know the ins and outs of consumer, making it harder for them to do deals, making it more expensive for them to do deals.
And so they fell burned and walked away a lot of the time, went and invested in makeup.
That makes perfect sense.
Well, I'm glad they're coming back to food and beverage.
It's been a pleasure to watch on nosh.com and bevnet.com, all of the acquisitions and investment, especially in the last quarter or so.
Pepsico has been really busy with Sieté and Sabre just in the last couple of months or so.
What are some of the other firms that you're seeing are more or less active even than they used to be?
I mean, honestly, again, like, yeah, it's great when there's a big transaction or two.
And everyone points to those.
There's a lot of big companies sort of selling off chunks of themselves to other big companies or divesting brands, but not necessarily acquiring.
It's not like, and I think we, I've written about this before, you know, if Kelinova gets bought by Mars, it's not like there's all of a sudden this massive portfolio gap for some big company to go and start buying tiny, tiny companies.
There's a big divide between M&A at that level and sort of small company finance.
For a while, it felt like those brands were, it felt like those big companies were willing to become part of that development stream.
And I think they still are, out of altruism-based research.
But the years of them putting millions and millions of dollars into that company, into those companies, or to fund altruism-based research seems a little less likely now.
If we're trying to identify some of the best opportunities for emerging brands who are looking for investment, could we look at Campbell's giving up NUSA to another organization as an opportunity for another brand to get picked up by Campbell's?
It's like when you're pitching your product to a retailer, you see something move out.
Can I get on the shelf?
Can I be there?
Well, so not if you're a yogurt company.
Right.
So, I mean, that's kind of the issue is Campbell sold NUSA because it didn't want to be in the yogurt business, didn't want to be in that perimeter business.
But, and this is the cool part that we were talking about, that I was talking about in the story in a day or two, what Campbell is going to be really good at buying are companies that support Campbell's best interests in the years to come.
So, maybe it's something else in the sauce business.
Maybe it's something else in the soup business.
It's no longer Campbell's Soup Company, right?
It's just Campbell's.
But it's that center store area where Campbell's has tended to have its stock and trade.
And we're seeing this with General Mills as well.
I was talking to Steve Young, who's the managing director of Manatree Capital.
He was with General Mills for many years.
His point was, look, General Mills is kind of going back to this milling idea, excuse me, taking grain and wheat and, you know, doughs and kind of moving it into a different process state and selling it off.
They really are buying a lot of dog food and pet food right now, which is a place where they feel like that, they make that kind of factory change well.
And they have a sales force that's geared up to sell it.
Now, General Mills also just got rid of a yogurt brand.
You know, they don't want to be necessarily a perimeter company.
And that's okay, because as you have, you know, a black talus or a Danone buying dairy companies, buying yogurt companies, you start to understand where you can sell too.
So, you know, right now, it might feel not great to imagine, you know, to imagine all these strategic sort of getting out of a mode where they were buying up everything.
But in fact, it'll make the sort of targeting a lot easier.
Are there any particular categories or trends that you see attracting the attention of investors?
I have an interesting one.
I want to hear what you think about this one.
Blue Stripes just finished their 20 million series B.
They're a whole cacao company.
Do you think their sustainability approach helped them acquire that investment?
Was it something else?
Well, so Blue Stripes is an interesting one because actually you did have a strategic participate in that round, which makes me kind of wrong.
But it's also, you know, it's Hershey's, which has bought, I believe, the founder's first product as well, right?
So look, I can't say why a strategic would get involved in that, other than to say it's cacat, you know, and Hershey's sort of core business is chocolate.
And there's a chocolate drought too, right?
Like, do you think that, does that play into things at all?
I've been hearing about Blue Stripes for a good year and a half as a company that people were thinking about investing in.
You know, obviously it had happened once before, because it was a Series B.
The breadth of the investor base there, you had an environmentally focused fund, you had a strategic, you had just, I think, a couple other special orientation kind of funds.
You know, it's a company that's got a lot of interest for a lot of people.
Now, there's a long way, again, between a $20 million investment in something that's half store, half brand still to this point, and M&A, where this company gets bought or merged into a bigger entity.
But I know that there are a lot of people who are interested in what's going on over there.
It's got a liquid format, it's got a whole fruit format.
So then it's interesting for folks.
And that's that altruism plus investment based research, I think, for Hershey's, whereas for Zendinis, yeah, I think they think that they can make some money off.
You talk to investors all the time, for NOSH, BevNET, and BrewBound.
You're probably the first to hear about so much of the information that we publish and in the interest of helping the emerging brands in our audience.
What are you hearing right now?
You have your ear to the ground, you're talking to folks.
What information are you able to gather that would be helpful for emerging brands?
I think there's a little bit more optimism around the ability to deploy capital on a venture basis.
That said, the thing that I continue to hear is that these companies, these funds don't want to invest in companies that are crappy businesses.
And so if you're an early stage founder, if you're growing brand, being able to operate as well as you can from the start to show that you have a 40, 50, 60 point margin, that you're, that you can go slow and still grow, that you can have, that you don't need saving to get to profitability.
And this is one of the things that we always see on the beverage side in particular, because it costs so much to move this stuff around, is you see these capital-intensive brands, you know, the brands that need a lot of money to keep producing product, go almost deeper and deeper into the hole.
So they need to have a massive sale in order to justify the amount of money that they've taken in and the amount of investment that they took in.
And it just makes it harder and harder to find a pathway without strategic acquisition.
What I keep hearing from investors is you're able to operate responsibly.
Being someone who's able to just fend for themselves, rather than waiting for a white night to come in and support them.
Build the home you wouldn't mind living in.
Would you say in closing, is that one of the core pieces of advice that you might have for emerging brands is to enjoy living in the house that you've built?
I think that founders should absolutely want to run the brands they're starting.
You know, at least until...
And you can't say that forever.
I mean, some people build brands to flip them.
They're really good at it.
But this stuff is really hard.
And, you know, I just...
I hate to see a founder trapped in a company that they don't want to be.
Right?
Wouldn't you rather do something else?
If you're not passionate about it?
Absolutely.
Well, Jeff Kleinman, thank you so much for joining us on Community Call today.
I should mention that there is a companion piece to this Community Call from Jeff Kleinman.
You'll be able to find that on NOSH and BevNET by the end of the week.
Jeff, it's been such a pleasure having you on here.
Thanks for telling us not only what we've seen, but maybe what we will see in the next year.
Well, thanks for having me.
That concludes another episode of the Community Call Podcast.
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