Natural Foods Merchandiser

Frontier Casts for Simply Organic Partner, Buyer

Simply Organic is in 3,500 stores nationwide, has new salad dressing and soup SKUs waiting in the wings and ideas for frozen entrees cooking. But it will take a strategic partner or an outright sale to get the master brand back on the growth track.

"While we believe wholeheartedly in Simply Organic as a concept in the market, we also realize that the concept requires more resources than we have," said Frontier Natural Products Co-op CEO Andy Pauley. "We don't want to see it languish. It needs input now and we think there are other parties in the market who will agree."

An offering memorandum circulated by Des Moines, Iowa-based Cybus Capital hit the streets in mid January.

Frontier scaled back ambitious rollout plans for Simply Organic in the summer of 2002. Despite a shoestring marketing budget, the company projected that the 70 SKU line of spices, sauce mixes and add-meat dinners launched in March 2001 would be carried by 15,000 stores within five years.

Pauley said he expects Simply Organic to log $6 million in sales in fiscal year 2003, "which is good for a completely new product line created less than two years ago.

"Because it's a master-brand strategy, we always had it in mind to continue with new product development periodically, but we ran out of money," Pauley said.

USBX Advisory Services Analyst Pat Turpin said the Simply Organic brand likely will be attractive to an individual investor or a group like Solara Capital, a private equity group that last fall purchased Annie's Homegrown brand of natural and organic pasta products from HomeGrown Natural Foods. "There are others out there as well," he said. "There are a lot of private equity groups that like the food sector and may make investments as minority investors or may look to buy the company, and back the management with capital and expertise to take it to the next level."

Though larger food conglomerates typically look to acquire companies with revenues in the $50 million to $100 million range, Turpin said there are very few naturals companies logging sales that high, which could make Simply Organic an attractive prospect to a Kraft Foods or a Nestle looking to strengthen its position with an organic line. "There is always a demand out there for unique products and unique brands or for companies that lend manufacturing or distribution efficiencies," he said.

Natural Foods Merchandiser volume XXIV/number 2/p. 9

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