Kara Cissell-Roell, VMG Partners founding partner and managing director, speaking at the Food & Beverage Innovation Forum. © FBIF
Private equity firm VMG Partners is looking to partner with brands that offer something that has never been seen before in the food and beverage industry.
San Francisco-based VMG, which has previously invested in companies such as Spindrift, Stone Brewing and Bare Snacks, last year set up a $100 million fund with Hillhouse Capital that is targeting consumer brands with a global reach and “differentiated” offerings.
Speaking with FoodBev at the Food & Beverage Innovation Forum in China, VMG founding partner and managing director Kara Cissell-Roell detailed the firm’s investment strategy, the trends it is interested in and how it supports partners post-investment.
“We’re looking for emerging brands that have a base of passionate consumers, that are driven by founders that are mission-oriented and looking to do something for the world that hasn’t been done before,” she said.
“So, generally, in our five core categories – which are food, beverage, personal care, pet and wellness – that means brands that are innovative, healthier, better for you or bringing something to the world that the world doesn’t already have.”
Cissell-Roell highlights the work of Kind founder Daniel Lubetzky. “In addition to creating a business that could help bring commerce and be helpful for the Middle East, he also created a beautiful brand that people love and that means so much to people from a nutrition but also meaning perspective.”
Having initially bought a minority stake in Kind in 2008, VMG sold the consideration back to Lubetzky in 2014 for a reported $220 million.
VMG is interested in brands offering lower-sugar products and last year invested in Lily’s Sweets.
Since its inception in 2005, VMG has provided support to more than 25 companies and it now sees increased growth potential in brands offering lower-sugar products. Last year, it invested in US chocolate maker Lily’s Sweets, which offers a range of confectionery sweetened with stevia. Brand founder Cynthia Tice is full of praise for VMG. “I purposefully selected VMG based on our shared values, as well as their history of creating meaningful relationships between founders and the new management team,” she said earlier this year.
VMG uses a variety of methods to discover brands to partner with. It sends scouts to trade shows and farmers’ markets to meet with founders when they are just starting out and trialling their products. The firm also searches in grocery stores such as Whole Foods Market, Kroger or Costco.
“We also do quite a bit from a data mining perspective,” said Cissell-Roell. “More data is available today than there ever has been and so we use data packages that we subscribe to to look for brands that are growing and trending. We also look on Amazon and on Tmall and on WeChat for brands that are trending and really try to capture what the consumer is excited about.”
Aside from its strong presence in the snacking category, VMG has expanded its portfolio in recent years with investments in beverage brands Humm Kombucha and Spindrift as well as bone broth protein supplement manufacturer Ancient Nutrition.
Post-investment, VMG tries to foster collaboration between businesses it has partnered with so they can learn from each other; they are encouraged to share best practices, particularly on the retail side, so they can be successful together. Meanwhile, the firm offers support in areas such as branding, packaging, social media and price pack architecture.
VMG invested in baby food brand Little Freddie last year alongside Hillhouse Capital.
Cissell-Roell says VMG offers a bespoke service for its partners depending on what each brand needs. “Every investment is really different,” she said. “I like to say that we spend 80% of our private equity professional time with our portfolio companies, which is very unusual for private equity; most of the time it’s the inverse, they spend 80% of the time sourcing.”
She added: “We try to help founders make better, faster decisions for their brand by bringing resources when they need them and how they need them.”
VMG is also benefiting from its partnership with Hillhouse Capital – the Asia-based private equity firm that counts Airbnb, Baidu and Tencent Holdings among its portfolio companies. Last October, the pair announced an investment in British organic baby food maker Little Freddie, representing their fourth joint investment following on from collaborations on Ancient Nutrition, Solid Gold and Stone Brewing.
In a joint statement, the companies said their previous collaborations have resulted in “significant international development”, exemplified by Stone Brewing’s entrance into the Shanghai market.
Despite the agreement with Hillhouse, Cissell-Roell said VMG is still focusing on the categories and the types of brands where it holds expertise. “What I love about the space is that it’s ever evolving and ever changing and we need to always evolve with it,” she said. “But I think investing in business and brands that have a real reason to exist is what I get excited about.”
© FoodBev Media Ltd 2019