Even after Krave founder Jon Sebastiani sold the premium jerky maker to Hershey for $220 million in 2015, the serial entrepreneur confesses he never stopped rooting for the protein snack or doing whatever he could to help it thrive. So when the confection's giant decided to jettison the struggling company earlier this year, Sebastiani said Hershey called him first to see if he would be interested in a surprise reunion with his former brand.
"This isn't a sentimental or nostalgic move for us," Sebastiani said of the acquisition, which was first announced by his private equity firm Sonoma Brands in May. "I think the Krave brand got lost. It still deserves to be very premium, and we think by returning innovation — and really with a keen eye on quality — the consumer is there to repeat and purchase Krave again."
The purchase of Krave by Sonoma Brands, which Sebastiani launched in 2015, is the latest in a string of deals that has seen the California investment firm amass a minority stake in more than a dozen fast-growing consumer brands, including Hu and Dang. A few products, including Smashmallow, Krave and Chef's Cut, which Sonoma acquired last month, are wholly owned brands.
"The level of play in our industry has increased significantly, but at the same time the competition of investors has also increased. That's why it's always important to focus on what makes us different, what real value can we at Sonoma bring that is unique to us."
Jon Sebastiani
Founder and managing partner, Sonoma Brands
In an interview, Sebastiani said Sonoma Brands is on the lookout for emerging personal care, as well as food and beverage brands to add to its portfolio despite growing competition among investors for young companies in fast-growing spaces that have a dynamic founder at the helm. It looks to acquire a double-digit stake in a company, usually Series A funding rounds, that have $20 million to $40 million in annual revenue.
Sebastiani, whose family owned a winery business growing up, said his experience nurturing young food companies like Krave and his business' deep connections with sourcing and manufacturing through Sonoma's other brands, give it an advantage in attracting new investments.
"The level of play in our industry has increased significantly, but at the same time the competition of investors has also increased," he said. "That's why it's always important to focus on what makes us different, what real value can we at Sonoma bring that is unique to us."
The increasing number of investors looking to buy stakes in up-and-coming, trendy companies had, at least until the emergence of the coronavirus pandemic, placed much of the power in these startups to "control their destiny," Sebastiani said. Those with rapidly rising sales and products in demand by consumers were positioned to pick the investors or food companies they wanted to work with to grow their businesses.
In recent months, companies participating in niches that have thrived during the outbreak, such as plant-based meats and healthy products, or the e-commerce space as shoppers and manufacturers place more dependence on the direct-to-consumer channel, have likely continued to prosper.
But for many young companies their financial position has changed as the pandemic worsened.
An upstart business that banked on introducing products in stores during the first half of the year, and using that success as a foundation to raise cash later in 2020, have seen those plans largely evaporate as retailers prioritize carrying high volume, well-known products popular with consumers on their shelves.
Product launches across the food and beverage space have been delayed, a move that has impacted less-established companies more than their big-branded competitors. Others simply lacked a sufficient online presence and struggled to compete.
"Right now, some of the power has shifted back to the investor and we are seeing great bands, terrific brands that have proven success that will struggle to raise capital," Sebastiani said.
While he declined to identify future acquisition targets, he said Sonoma sees "tremendous opportunities out there right now" and that the investment firm remains "active" in searching for new deals.
Sebastiani said, "I see the potential for a lot of activity to take place. It's going to be a very creative year where brands that are unable to raise capital will look for partners and you'll see mergers, you'll see brands that just kind of consolidate toward each others."
