Natural Foods Merchandiser

Deals heat up at summer's end for naturals companies

Money made the naturals world go 'round in August, as a merger, a sale and a cash infusion were announced.

In a surprising move, BC Natural Foods, the parent company of Coleman Natural Meats, merged with a conventional meat supplier Aug. 22 to form Coleman Natural Foods.

The merger with Gainesville, Ga.-based KDSB Holdings creates a company with more than $500 million in assets, according to published reports. KDSB operated the Kings Delight and Snow Ball Foods divisions, which are primarily distributed through foodservice channels including schools, military posts and convenience stores. Brands under these divisions include Clux Delux chicken, Executive Chef deli meats, and Frank & Teressa's Anchor Bar Buffalo Wing products.

Robyn Nick, a spokeswoman for Coleman, said the merger "gives us the opportunity to bring organic and natural products into new market channels, and to accelerate the development of natural and organic convenience products." She added, however, that "Coleman will continue to focus on food retailers, which includes mainstream grocery stores" as well as naturals retailers.

BC Natural Foods was itself the product of numerous acquisitions in 2002 and 2003, including Petaluma Poultry, Gerhard's Sausage and Coleman Natural Meats.

"Coleman Natural Foods now ranks among the top 30 meat processors in the United States," said Robyn Nick, a spokeswoman for the Golden, Colo.-based company. Mel Coleman Jr. will continue to serve as chairman of Coleman Natural Foods. George Chivari, formerly the president and CEO of BC Natural Foods, now serves as president and CEO of the new company.

In 2005, Coleman Natural Products had estimated net sales of $100 million, according to The National Provisioner, a trade publication for meat, poultry and prepared food processors. Kings Delight had net sales of $125 million last year and Snow Ball had $50 million in sales.

Larry's sale divvied up
Larry's Markets, the upscale Seattle-area grocers, faced the chopping block last week and came out in five different parts.

After an initial offer was outbid in late August, the chain's six stores have been sold to five different buyers. Only one or two are likely to keep the Larry's name for now, according to Larry's bankruptcy attorney Jay Kornfeld.

The Totem Lake and Bellevue stores, bought by TRF Pacific/TRF Northwest real estate entities for $3.8 million, will be closed and the locations re-rented. The Seattle Post-Intelligencer reported that sporting goods chain G.I. Joe's would move into the locations around April 2007.

The Queen Anne location sold for $1.6 million to Food Markets Northwest, owner of the five-store upscale grocery chain Metropolitan Markets in the Seattle and Tacoma, Wash., area. Kornfeld said Metropolitan Markets plans to run the Queen Anne location under the Larry's name for now, likely changing it to Metropolitan Markets in the future.

The Tukwila location sold for about $200,000 to Tukwila Trading LLC, related to Summit Trading of Puyallup, Wash., Kornfeld said. And the Redmond location sold to Associated Grocers, cooperatively owned wholesalers, for a price between $430,000 and $440,000.

The north Seattle location was purchased by Hop Thanh Supermarket Inc., which owns an Asian grocery in Seattle. The Seattle Times reported that Hop Thanh did not yet know what name the store would operate under, but that it would be a combination Asian and non-Asian market.

Larry's Markets, which have been in the Seattle area since 1964, filed for bankruptcy protection in May.

Glacéau water flush with capital
Glacéau, the maker of vitaminwater, is feeling fortified by a new cash infusion. The Tata Group agreed to invest $677 million in Glacéau to purchase the 30 percent stake in the company previously held by TSG Consumer Partners. Tata also promised to invest further growth capital.

"We've had certain obstacles keeping retailers' shelves stocked to keep up with the explosive demand for vitaminwater," said J. Darius Bikoff, chief executive of Whitestone, N.Y.-based Glacéau. "You're going to see a big initiative from us and our distributors expanding our presence, expanding our shelf space, expanding what we do from coolers to displays," he said.

Mumbai, India-based Tata is in a position to help. Its 2005 revenues totaled $1.97 billion in the United States and $22 billion globally. The group's beverage holdings include Tetley Tea, Good Earth Teas and Eight O'Clock Coffee.

Bikoff said Tata's background could enable Glacéau to become steeped in tea-based SKUs. "They are probably one of the world's leading companies involved in the technology around polyphenols and [EGCG], which are the ingredients that … make tea so good for health," he said. "It is probably safe to say that we are very excited about tea. We've got a lot of innovation floating around, you know, right now about tea, and it's an area that we definitely want to get into more deeply in the future."

Bikoff also announced that the company has begun rolling out smaller bottles in four-packs, making them convenient for children to take to school.

Bikoff said the company has grown more than 200 percent annually, and attributes that largely to the backlash against soda. "The enhanced water category … is the fastest-growing category in the entire beverage market in the United States," he said. Bikoff anticipates the company's heady growth will continue into the future. "The $2.2 billion valuation for Glacéau today is going to unlock $10.2 billion in future potential," he said, noting he expects that growth to occur within the next five years. Bikoff also said he would not rule out taking the company public. "We have a lot of options open to us in the future and an IPO is certainly one of them."

He also put to rest rumors of a buyout by a multinational soda brand. "Look, I have tremendous respect for Coke and Pepsi. They're great at what they do. I also think that we're probably better at what we do than they would be." he said. "This [investment], I think, sends a very, very strong signal to our distributor network and to our retail partners, who are so critical to our success, that we are here to stay."

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