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Articles from 2019 In March


[email protected]: Walgreens to sell CBD products in 9 states | The 'crazy' fight over the future of vegetables

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Walgreens to start selling CBD-infused products in 9 states

Right on the heels of a similar announcement from CVS, Walgreens has revealed that it will start selling hemp CBD products in Oregon, Colorado, New Mexico, Kentucky, Tennessee, Vermont, South Carolina, Illinois and Indiana. Walgreens has not divulged which brands they will be carrying or when the products will be rolling out. Read more at Mercury News …

 

The crazy food fight over the future of vegetables

 

Vertical farming, though hugely popular among venture capitalists, has a far higher carbon footprint in terms of energy used when compared with produce grown in a greenhouse or soil-based farm. This finding gives credence to the many conventional farmers who argue that there are no silver bullets when it comes to increasing food supply for a growing population, and that a combination of many ecologically mindful approaches may be necessary to feed future generations. Read more at Men's Health …

 

Farmers bet big on the South’s first organic hemp cooperative

The state of Kentucky is aiming to be “the leader, and the epicenter, of industrial hemp production in the United States,” according to the state’s Department of Agriculture. Farmers at one certified organic hemp cooperative are preparing for an organic hemp “gold rush” because of its rarity in the space and the relatively lengthy time it will take conventional health farms to obtain USDA organic certification. Read more at Civil Eats …

 

Can soil microbes slow climate change?

Global carbon emissions hit an all-time high last year, and some experts are now arguing that finding an optimized way to store carbon dioxide from the air into the soil while also increasing agricultural years is of the utmost importance. One approach to this would be to “tip the soil’s fungal to bacterial ratio strongly toward the fungi.” Microbiologist David Johnson asserts that if this agricultural approach were implemented, “the entire world’s carbon output from 2016 could be stored on just 22 percent of the globe’s arable land.” However, this emerging technique has note yet been tested to see if it could scale up economically on large commercial farms. Read more at Scientific American …

 

The enormous numbers behind Amazon’s market reach

As talk of regulating the e-retailer behemoth ramps up in the political sphere, Amazon’s growing presence in multiple markets may soon be its downfall. However, Amazon officials continue to stress that the “company’s broad reach is not on its own an indication of market power … And despite being the largest e-commerce player, Amazon still accounts for roughly 1 percent of global retail.” Read more at Bloomberg …

How a local food hub brings unique, small-batch products to New Seasons Market's shelves

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Part of New Seasons Market’s mission is to stock small-batch, locally made foods. The problem? Lots of small vendors don’t have the capacity to service a large retailer like New Seasons, which has 21 stores across Oregon, Washington and Northern California. Enter The Redd.

The Redd is a two-building campus in Portland, Oregon, that houses a system of services–from production, assembly and packaging spaces to warehousing and delivery–designed to help small food businesses thrive. For New Seasons Market, partnering with The Redd has helped expand the store’s access to local and small batch vendors.

While some brands complete all steps of product creation on site, The Redd’s delivery service called GreenWheels has been essential in bringing small creators to New Seasons. Essentially, this allows brands to drop their store orders at the warehouse for consolidation and delivery, and then the lot of them are delivered to their destinations. “This shared final-mile delivery service offers a cost-efficient way for vendors to spend less time self-delivering product, and more time on revenue generating aspects of their business,” explains Chris Tjersland, director of brand development at New Seasons Market. This not only saves time and money, but also cuts carbon emissions: in the three years since GreenWheels started, it has saved more than 90 vendors over 12,000 individual delivery trips to New Seasons Market locations, saving more than 320,000 pounds of carbon dioxide emissions.

But New Seasons Market and its shoppers aren't coming away from this partnership empty-handed. “Our customers have access to even more unique, locally made, small-batch products because of The Redd,” says Tjersland. “This partnership allows us to do what we do best: locating and merchandising the highest quality products from makers in our community.”

The 'hemp opportunity' is in full flower at NoCo Hemp Expo

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The world’s largest hemp exposition opened Thursday in Denver to rollicking crowds and is set to attract 10,000 people and 225 exhibitor booths interested in the plant’s disruptive potential in a wide range of industries.

The growth is led by hemp-derived CBD as supplements, which has 80 booths at the show. The CBD market was an estimated $390 million in 2018 in U.S. sales, according to Sean Murphy, founder of Hemp Business Journal, and is estimated to grow to $2.5 billion by 2022. Globally, sales are estimated to grow from $3.5 billion to $5.7 billion by 2020.

“That’s big-time growth,” said Murphy. “This is the industry to be part of if you’re looking for growth.”

NoCo Hemp Expo exhibitors include farm equipment brands like John Deere, and businesses touching soil nutrient health, apparel, building material and bioplastics in addition to CBD.

“There are so many opportunities with how this plant can be an ingredient in so many things,” said NoCo Hemp Expo co-founder Morris Beegle. “Hemp is the super ingredient of the future.”

The business growth was given a significant push forward by the December 2018 passage of the Farm Bill, a five-year mandatory piece of legislation that covers everything from food stamps to federal agricultural support.

“The Farm Bill provided us an opportunity to market all the hemp industry has to bring,” said Garrett Graff, senior attorney with the Hoban Law Group, which specializes in all things cannabis from hemp CBD to marijuana law. “It’s a new era. We’ll see increased production, better regulatory certainty, and an increase in scale around the world.”

The regulatory certainty was helped along by a statement by outgoing FDA commissioner Scott Gottlieb, MD, who this past week said the agency—which is the last federal agency standing to regulate the hemp CBD business—will allow the industry to flourish except when companies make drug-disease claims. Such “over the line” claims also dog the greater dietary supplements industry.

“I will take enforcement action against CBD products that are on the market if manufacturers are making what I consider ‘over-the-line’ claims,” said Gottlieb.

For example, Gottlieb said FDA would take action against marketers of CBD that claim to cure cancer or prevent Alzheimer’s disease because those statements “could mislead a patient to forgoing otherwise effective therapy.”

This heralds the mainstreaming of hemp CBD supplements, and provides an opportunity for legacy Big Natural supplements companies to get into the game. This is seen as being a game changer for health food store retailers, who now have a range of supplement brands they already know, trust and stock that they can now rely upon for quality product. It may also herald the start of consolidation and competition that may drive out of business many of the smaller hemp CBD start-ups—most of which were hoping to gain enough of a foothold to make it once the larger, more well-capitalized companies started entering the space.

“This industry is in a love relationship with the natural products industry right now,” said Steve Hoffman, president of Compass Natural, which does publicity for a dozen hemp companies and many others in the larger natural products industry. “We’ll see both of them grow strongly.”

Other than hemp CBD, the 2018 Farm Bill provides a firm foundation for hemp farmers.

“The industry is certainly about to take off,” said Garrett Bane, chief sales and marketing officer of GenCanna, which is leading the hemp agricultural movement from Kentucky. “It starts with the family famers and creating a compliant manufacturing and supply chain that will benefit the brands and consumers so they know they’ll have a chain of custody from seed to sale. We’re turning a corner.”

The NoCo Hemp Expo, now in its sixth year, started in a bar packed with 330 people in Windsor in 2014. Having sold out the space in Loveland last year, and this year sold out in the Crowne Plaza hotel, next year it’s moving to the much-larger Denver Convention Center.

Beegle said he expects more than 500 booths next year.

“We’re blazing trails,” said Beegle. “We wanted to provide this stage for people to come together from all over the world to talk about hemp and its benefits. We want to make a new world, a new agricultural commodity, to take this crop to the next level.”

Beegle’s umbrella company, WAFBA, stands for We Are For Better Alternatives. It includes the Southern Hemp Expo, held in September in Nashville, TN, the Asian Hemp Summit in Kathmandu, and the Hawaii Hemp Conference.

Natural Foods Merchandiser

Immunity update: Flu season reverberations change category

Getty Images Immunity update: Flu season reverberations change category

Consumers might be ready to breathe a collective sigh of relief with the last year’s flu season—one of the worst flu seasons in nearly a decade—behind us.

Except that it’s not really behind us.

What remains after that dangerous season is growing consumer vigilance and obsession with immune health—a big buzz phrase in today’s supplement market. Industry insiders are predicting a boom in sales and innovation.

“We saw a huge effect from a harsh and publicized flu season this past year, with growth more than doubling for the year,” says Claire Morton, NBJ senior industry analyst. “Vitamin products such as Airborne and Emergen-C saw strong growth, as well as herbal immunity products.”

Global market sales of immune health supplements already are climbing. The sector was valued at $14 billion in 2017 and is expected to reach $25 billion by 2025, according to a forecast by Persistence Market Research.

Why? More consumers are thinking beyond Purell, vitamin C and Airborne, thanks to market messaging and industry-supported clinical studies about how we can boost our immune systems all year long.

The prevailing message is that immune systems can be wrecked by diet, stress, aging and antibiotics, leaving people vulnerable to all sorts of ailments any time of the year. A healthy diet, exercise and meditation are well and good, but supplements may be even better.

The good news is that nutrition for immunity is spread across multiple categories, leaving plenty of room for innovation.

Probiotics and prebiotics

With 80 percent of the immune system located in the gut, the good “bugs” in probiotics are catching on as immune-boosters.

“Consumers are very aware of probiotics. The awareness has grown by 12 percent over the last five or so years,” says Megan DeStefano, global probiotics marketing leader for DuPont.

“What probiotics are most known for is gut health, but immune health is quickly coming in a close second.”

DuPont’s portfolio of probiotics for immune health includes its Howaru Protect line for pregnant mothers and infants, kids, athletes, adults, and seniors—five different strains for five targeted populations. DeStefano expects major future growth of probiotics, more products for targeted populations, and many more scientific studies proving efficacy.

In fact, research on the human microbiome already seems to be exploding. DuPont and other major bands, for example, have sponsored multiple clinical trials looking at how various probiotic strains—including DuPont’s Bifidobacterium lacprobiotics for immune healthtis (Bl-04)—affect people who are exposed to the common cold.

What else is coming? Chocolate pairs well with probiotics. “We see consumers more and more want food-like formats,” DeStefano says. Also look for probiotic pairings with other wellness ingredients.

Healthmune+ Junior is one of these blends—a sachet of blended prebiotic and probiotic with cocoa powder. Wellmune, promoted as a prebiotic super fiber, is a key ingredient.

Wellmune, a proprietary baker’s yeast beta glucan, has experienced significant growth in the last few years, says Donald Cox, director of research and development.

Wellmune, which was acquired by Kerry in 2015, has benefited not only from working under a bigger umbrella but also from clinical studies such as one earlier this year suggesting that Wellmune may protect intestinal barrier function, even in adults faced with stress. The body’s intestinal barrier function allows for the absorption of good things like nutrients and water while defending against toxins and pathogens.

“We are getting people familiar with the fact that what you eat can affect your immune system,” Cox says.

Omega-3 fatty acids

Fish oil also could play a big role in the growing immune-health market. Omega-3 fatty acids are expected to be the fastest-growing immune-health supplement ingredient during the next seven years, according to a Persistence Market Research global market study released in April.

While most of the research on DHA and immune health has focused on fetal- and infant-brain development, a new pilot study of adults suggests that concentrated DHA fish oil activates B-cell (white blood cell) responses. That study of obese adults was published in The Journal of Nutritional Biochemistry and sponsored by AlaskOmega, a brand of fish oils.

Glutathione

Glutathione, considered the mother of all antioxidants, is not new to the market, but the sweeping claims of what it can do include everything from immune health to skin lightening.

“There are probably over 800,000 posts on Instagram alone with #glutathione,” says Elyse N. Lovett, marketing manager for Kyowa Hakko, which manufactures a branded glutathione ingredient called Setria.

Industry analysts predict the global glutathione market will rise from $182 million in 2016 to $211 million by 2021, according to a market report.

Glutathione protects cells against oxidative damage and stimulates the body’s natural killer T cells—the immune system’s front-line assassins. The body produces its own glutathione, but levels can be depleted by poor diet, pollution, stress and aging, especially after age 45. It’s found in foods, such as garlic, onions and cruciferous vegetables. But the typical diet doesn’t include those foods every day, Lovett says.

Watch for more glutathione in products for immune support, especially marketed to older adults, and in supplements for skin health and sports performance.

 

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Target audiences

Immunity supplements are going to get a lot more personal, predict DeStefano of DuPont and Cox of Wellmune.

Immune-boosting supplements are increasingly being formulated for and marketed to specific consumers: aging baby boomers, expectant mothers, back-to-school kids, health-conscious millennials and stressed out career-types.

“The demographics are all over the map,” Lovett says.

Pill fatigue

“Consumers are looking for novel ways to take some of these products,” Cox says. “In the coming years, you will see more and more food- and beverage-based supplements in the area.”

collage of immune health shotsExpect more sachets (just add water), gummies, shots—beverages, not needles—and even ice pops and other treats you can feel good about eating on the go, he says.

Tiny tonic shots of refrigerated juice, herbs and spices were hot at Natural Products Expo West 2018 and are landing shelf space in natural food stores. Some of the many shots out there include Kor’s Wellness Ginger, Ginger Shot Inc.’s Tulua Wellness and Turmeric Wellness, Source Naturals’ Immune Support, So Good So You Probiotic Wellness and California Juice Co.’s Immunity with apple cider vinegar.

As for immunity supplements disguised as treats, last summer New Jersey mom Marisa Teiner launched Feel Better Pops—probiotic-laced fruit and herb popsicles that promise “feel better tummy & immunity.” Ingredients include ginger and GanedenBC30, a probiotic that can withstand freezing.

“We know ginger not only helps with an upset stomach but it also helps the immune system. We know probiotics restore gut health, but it also is good for your overall immune system,” says Teiner, who has a nutrition and culinary background.

The pops started with a quest to help her son, an ice-pop aficionado, recover from a stomach virus. The popsicle Teiner created worked so well that she took it to the Rutgers Food Innovation Center and ultimately created Feel Better Pops. She introduced three flavors to her Tri-State Area at farmers markets, local stores, senior centers and back-to-school events.

Now she’s finalizing a deal with Shop Rite and looking for a distributor. A throat-soothing pop and an adult-wellness pop are coming soon.

Careful claims

Teiner and other manufacturers know their immune health claims must be carefully crafted so they don’t violate Food and Drug Administration and Federal Trade Commission regulations.

By sticking to vague phrases like “supports immune health” and “seasonal support,” brands can avoid making direct claims and still get their messages across.

There is, however, a cautionary tale: In 2008, the makers of Airborne agreed to pay up to $30 million to settle FTC charges for falsely advertising that the product could prevent colds. Now Airborne is marketed as an “immune booster.”

While makers may be choosing their words carefully, their online reviewers are not—creating a tricky situation with the FDA as the industry grows and attracts more attention.

Justin Prochnow, a leading supplement-law attorney, advises companies to avoid “liking,” re-tweeting or otherwise sharing certain customer reviews and testimonials on their Facebook pages, websites and other social media platforms.

In 2014, the maker of Zarbee’s children’s cough syrup fell into hot water with the FDA after liking customers’ comments on its Facebook page. The customers described how Zarbee’s products helped them with bronchitis, pneumonia colds, congestion, allergies and insomnia.

The FDA considered the company’s “like” as “evidence of intent” to endorse those claims. Expect to hear more about building, boosting and supporting immune health but not curing or treating specific ailments.

With the possibilities for new science, new products and new education about immunity, insiders see plenty of room to grow inside those claim limits. Consumer interest inspires industry innovation. Interest following this recent flu season is high.

If consumers use immunity products and experience fewer colds and infections, the worst flu in years could be the best news ever for the immunity category.

FDA approves CBD supplements–with one exception

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FDA’s outgoing commissioner on Thursday told lawmakers his agency is using its “enforcement discretion” to target products containing cannabidiol (CBD)—an ingredient from the cannabis plant that has proliferated in cosmetics, food, beverages and dietary supplements.

“We’re using enforcement discretion right now,” FDA Commissioner Scott Gottlieb, MD, said during a hearing before a subcommittee of the U.S. Senate Committee on Appropriations in response to a question from Sen. Patrick Leahy (D-Vermont). “I will take enforcement action against CBD products that are on the market if manufacturers are making what I consider ‘over-the-line’ claims.”

For example, Gottlieb said FDA would take action against marketers of CBD that claim to cure cancer or prevent Alzheimer’s disease because those statements “could mislead a patient to forgoing otherwise effective therapy.” 

FDA has targeted such claims in warning letters since 2015, but attorney Ashish Talati said in an email that Gottlieb’s remarks were noteworthy because they confirmed for the first time that the agency is “exercising enforcement discretion when it comes to CBD products."

“That will help as we see some FDA investigators, state and local officials referencing FDA's Q&A page [on CBD] and making enforcement decisions,” said Talati, a partner in Chicago with Amin Talati Upadhye LLP, who counsels clients on FDA regulations and the complexities surrounding CBD.

Citing “enforcement priorities and our limited resources,” Gottlieb acknowledged CBD-containing products are on the market that FDA hasn’t taken action against. There are reportedly hundreds of brands in the hemp-derived CBD market.

“That’s not an invitation for people to continue marketing these products,” Gottlieb said during a congressional subcommittee hearing to review the fiscal year 2020 budget request for FDA. “We’re concerned about it, but we heard Congress loud and clear here. We know you want a pathway.”

In the 2018 Farm Bill, Congress removed hemp from the Controlled Substances Act and treated it as an agricultural crop—a seismic shift in U.S. cannabis policy.

But hurdles remain to marketing CBD in certain product categories. For years, FDA has asserted CBD can’t be added to food or sold in dietary supplements based on its interpretation of the Federal Food, Drug & Cosmetic Act (FDCA).

In 2018, FDA approved a CBD medicine, Epidiolex, for the treatment of seizures associated with rare forms of epilepsy. CBD was previously the subject of “substantial clinical investigations” made public before the compound was marketed in a food or supplement, according to FDA.

“So even if there wasn’t an approved drug, because it was never previously in the food supply, we don’t have a clear route to allow this to be lawfully marketed short of promulgating new regulations,” Gottlieb said.

FDA is looking into a potential rulemaking that would allow CBD to be sold in conventional food and dietary supplements. During a Q&A earlier this month at the Brookings Institute in Washington, Gottlieb stated FDA can finalize an "average" rule in two to three years. But the commissioner suggested it would be much longer for CBD because it would be a “highly novel rulemaking to do a complex rule like this.”

In several speeches and in testimony on Capitol Hill, Gottlieb has signaled FDA is willing to work with members of Congress on a legislative solution if his agency determines a rulemaking would be too onerous.

Leahy asked Gottlieb keep him and his staff updated on any potential legislation solution.  

“I would just like to get some certainty here," the senator said. "I’m not diminishing the complexities, but I’d like to get some certainty.”

Gottlieb disclosed FDA has assembled “a very high-level working group staffed by some of our most creative policy-makers to try to think through alternatives, including potential legislative alternatives.” Amy Abernethy, MD, PhD, Principle Deputy Commissioner of Food and Drugs who previously worked as chief medical officer of Flatiron Health, is leading the working group.

Gottlieb suggested Congress could grant FDA authority to treat CBD as a food ingredient at certain concentrations and a specific potency and purity while allowing it to exist as a drug product at different concentrations and a different strength and purity.

“FDA will look for industry input when it comes to that,” said Talati, who anticipated "a big role for the various hemp CBD stakeholders to play in the near future.”

It wouldn’t be unprecedented to allow a pharmaceutical drug and another product like dietary supplements to co-exist. Gottlieb mentioned fish oil as an example.

But Congress didn’t need to pass a law to allow fish to co-exist in multiple product categories, Gottlieb suggested, “because it was previously in the food supply. CBD obviously was not. It was a scheduled substance …. prior to recent years.”

Gottlieb is expected to depart FDA next week. It remains to be seen how his successor will view CBD. Norman “Ned” Sharpless, MD, director of the National Cancer Institute, will assume Gottlieb’s role on an interim basis.

In Session

Proven strategies to forge deep connections with consumers

ReGrained Under 30

“Today’s customers don’t just consume our products, they actually are consuming pretty much everything about our company … individually they don’t care about each of the things that we’re doing, but collectively they care about everything.”

— Dan Kurzrock, ReGrained

Highlights:

  • The ReGrained mission: to better align the food we eat with the planet we love, and doing that through a model of upcycling.
  • Broadcast your message through every channel possible, but make sure you treat it as a dynamic conversation.
  • Our financing was very untraditional, with 700-plus investors via equity crowdfunding.
  • Discussing the “P” in CPG. We’re in the future trash business.
  • Being human vs. just being a brand/status quo for business; think about your values and how you create culture around those. 

This session—Connecting with the Changing Consumer: Brand Strategies for Meeting Consumers Where They Are—was recorded at Natural Products Expo West 2019. 

In Session

Examining the 'I' in retail: Data-driven personalization

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“Reinventing consumer discovery is crucial and essential to maintaining growth in this industry. We have to provide customized recommendations and offerings that will really make it easier for all of us to get what we want and what we need.”

—Sarah Schmansky, Nielsen

Highlights:

  • Data, artificial intelligence and machine learning have altered the way that we discover products and search for things.
  • Right offer + right person + right time = 13x ROI and effectiveness.
  • Growth of socially charged advertising is upwards of $2 billion and growing 4x since 2011.
  • Click-and-collect pickup lockers are probably the simplest and most ubiquitous expansion we’ve seen in this space over the last few years. 
  • We’re not ready just yet to purchase our fresh products online; this is where brick-and-mortar retailers will continue to stay relevant and win, and ultimately bring consumers back into the store.

This session—Connecting with the Changing Consumer: The “I” in Retail--Data-Driven Personalization—was recorded at Natural Products Expo West 2019. Click "download" below to access the presentation slides. 

[email protected]: Jury awards second plaintiff in Roundup trials $80M | EU lawmakers back single-use plastics ban

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$80M awarded to man who jury says got cancer after Roundup exposure

The second phase of the most recent trial against Bayer-owned company Monsanto has ended with the jury in San Francisco awarding $75 million to Edwin Hardeman, after determining that the herbicide Roundup caused the plaintiff’s non-Hodgkin lymphoma. The ruling shows that last year’s case in which Dewayne Johnson was awarded $289 million in punitive and compensatory damages was not a one-off. Bayer maintains that glyphosate-based herbicides are not carcinogenic. Read more at The San Francisco Chronicle …

 

EU lawmakers back ban on single-use plastics, set standard for world

 

Single-use plastic items (e.g. straws, forks, knives, cotton buds) will be effectively banned in the European Union by 2021. Currently, the EU recycles “only a quarter of the 25 million [tons] of plastics waste it produces per year.” Especially now that China has stopped accepting other countries’ refuse, it’s up to legislators to end the stream of waste and come up with circular solutions. Read more at Reuters …

 

Dramatic sardine population decline means likely West Coast fishing ban

The “modern-day sardine collapse,” as one scientist puts it, has virtually guaranteed a ban on commercially harvesting the small schooling fish this spring. The collective weight of fish this year is “well below the 150,000-metric-ton threshold required before commercial fishing can be allowed,” and biologists are blaming changing ocean conditions as one contributing factor. Read more at The San Francisco Chronicle …

 

Tariffs force Alaska seafood industry to look beyond China

Alaska’s seafood industry has begun to look for markets beyond China after a 25 percent Chinese tariff on Pacific Northwest seafood was introduced in the summer of 2018. However, there is currently a “$5.5 million, three-year federal agricultural trade promotion grant awarded in January [that can be used] to develop nontraditional markets such as Japan, Southeast Asia and parts of South America.” Read more at Washington Times …

 

Arkansas passes bill to prevent sale of ‘cauliflower rice’

Rice, according to a new Arkansas bill, can only mean “‘the whole, broken, or ground kernels’” from the species Oryza sativa L. or Oryza glaberrima, or from “one of the four grass species in the Zizania or Porteresia genus (i.e., wild rice).” This measure was intended to protect Arkansas’ rice industry, which produce over 40 percent of American rice and has created roughly 20,000 jobs in the state. Read more at Munchies …

What’s happening under Dawson’s Market’s new ownership?

Dawson’s Market natural products store

In October 2018, store leadership announced that Rockville, Maryland, natural products retailer Dawson’s Market would close by the end of the month. Within days, a rush of community voices pleaded for the market to remain open. So the director of operations, Bart Yablonsky, stepped up, working with the previous owner, landlord, city, county and many residents to find a way to keep Dawson’s alive. After just seven weeks, the store reopened under Yablonsky's ownership.

While Yablonsky plans to stick to the store’s core foundation of providing local healthy food and strong community support, some exciting changes are underway. Customer-requested products are making their way to the shelves, as are many non-food convenience items such as light bulbs, batteries, conventional medicine, basic office supplies and conventional cleaning and paper products. A new gift section provides rotating options for shoppers, and an expanded deli now offers sliced meats and cheeses. The calendar will also look a little different, with even more community events added; these events range from kid and adult cooking classes to wine classes.

“Things are going well,” says Yablonsky. “Customers have been so supportive over the past months as we rebuild, and I hear at least twice a day a sincere ‘thank you’ for reopening. We could never have done it without the support of everyone.”

IdeaXchange

Sorry, your company is too small to be acquired

Luke Vernon

I thought my prior company would get acquired after four or five years when we crossed $25-30 million in revenue. I was wrong. It took eight years and getting to nearly $80 million in revenue. Even then, we were a small transaction, relatively speaking, for the industry we were in.

So many founders (and investors) fall victim to this same trap, thinking they can grow a company to $20 million in revenue and it will be acquired. Think again.

Major strategic buyers (i.e. big companies) don’t want to mess around with small acquisitions. It takes the same amount of work for them to integrate a $20 million business as it does a $100 million or $200 million business. That might sound surprising, but it’s the truth. In very rare occasions have large companies gone that far down market to acquire a small asset of $20 million in size. 

I challenge anyone to name three companies in the past five years who have been acquired by a strategic buyer before they crossed $30 million in revenue (email me if you can!).

Per a recent conversation with Rodney Clark, founder of Aspect Consumer Partners, a leading investment bank, and who has advised on transactions involving companies like Siete Family Foods, Late July Snacks, Annie’s, Revive Kombucha, Eco-Products and dozens of others, he says that “the big strategics are very internally focused right now, trying to increase operational efficiency, drive out costs, divest of non-core assets/businesses and manage their debt-loads so the M&A environment is likely to slow down in the near term.”

We’re seeing it in the data

According to Nutrition Capital Network and Whipstitch Capital, there were 225 M&A deals in 2018 in the following sectors: retail and distribution; supplements; ingredients; contract manufacturing; over-the-counter and personal care; and natural, organic and functional food.

That’s down from 276 in 2017, an 18 percent drop!

As important, you can see that there just aren’t that many acquisitions completed each year relative to the number of startups entering the space. Think of all of the new brands you see every year at trade shows, so many of them thinking they’ll be able to grow to $20 million and be acquired. Yet only 225 companies actually are! 

What happens to the rest? 

Let’s not worry about them.  You’re not one of them. 

But hypothetically speaking, what if you are one of the other thousands of companies that doesn’t get acquired in the timeline like you envisioned? Are you building a sustainable business for the long term? Are you obsessed with your customers (not obsessed with your own products)? Are you financially sound so that you can survive if you aren’t cashed out by an acquirer in a few years?

One investor’s opinion: Don’t bank on getting acquired in the timeframe you expect. Don’t build your business for an exit. Don’t rely on that happening. It inevitably takes longer and you inevitably have to be bigger than you originally expected. Build your business to last.

If I can be a sounding board on your business building journey, feel free to email me (contact info found at ridgelinevc.com).

Luke Vernon is a managing partner of Boulder-based Ridgeline Ventures an investment firm in healthy living and active lifestyle companies. Luke is an operator-turned-investor, having grown a company as the COO to $80M before it was acquired. Luke is an advisor and investor in several companies and he also founded Luke's Circle which helps emerging companies find top talent.