Private equity's appetite in the food industry

Due to impressive growth in specialty foods sales, new products and brands, changes in consumer tastes, and other industry factors, private equity groups have developed significant interest in targeting investments in specialty food companies. There are a significant number of middle-market food and foodservice companies, representing a considerable amount of consolidation opportunities. When it comes to identifying attractive targets, private equity firms are looking for ones who are niche, value-based businesses that are durable and stable, while also having capacity for substantial organic growth.

During a recent panel discussion, select groups of private equity firms that have made recent investments in food and beverage companies gave their views on the middle-market food and beverage industry. The panelists included:

• Andy Unanue – Managing Director – AUA Private Equity Partners
• Ed Benford – Managing Director – Benford Capital Partners, LLC
• Chaoran Jin – Managing Director – Keystone Capital
• Meranee Phing – Partner – The Riverside Company

In an excerpt from Private Equity Craves Specialty Food Companies, the panelists describe their current interests in the food and beverage market.

AUA: Given my real-life expertise in the space we are particularly keen to invest in food and beverage. Four of our five existing platform investments in the fund are in food and beverage and we will likely add one or two more platforms in this space for Fund 1. Some examples of our portfolio companies include:

• Raymundos Food Group is a value-based Hispanic-oriented consumer packaged goods (CPG) company focused on branded and private label refrigerated desserts including gelatins, flans, puddings, and other ready-to-eat products
• Tijuana Flats is a fast-casual restaurant chain offering made-to- order Tex-Mex cuisine with fresh ingredients with over 120 corporate and franchise locations in the Southeastern U.S.
• Indulge Desserts, which is more of a holding company as we continue to execute on our thesis of building an institutional desserts platform through acquisition, is a manufacturer of premium gourmet desserts, offering a full line of American and international/ethnic, all-natural products to foodservice distributors, restaurant chains, and grocery throughout the U.S.