natural balance pet food acquisition
Updated: Smucker's closes sale of Natural Balance for $50 million
ORRVILLE, OHIO The J.M. Smucker Company announced Jan. 29 it had officially divested its Natural Balance business, selling the premium pet food brand to Nexus Capital Management for roughly $50 million.
"The closing of this transaction supports our priority to focuson thecorebrands within our pet food andpetsnacks portfolio,includingRachael RayNutrish, Milk-Boneand Meow Mixamong others, which create a unique portfolio with significant long-term growth potential thatmeets consumer needs across value, mainstreamandpremium offerings," saidMark Smucker, president and chief executive officer.
After several consecutive quarters of poor sales performance from its Natural Balance premium pet food brand, Smucker'son Dec. 3 opted to divest the brand. The Natural Balance business generated net sales of approximately $220 million for the company's fiscal year ended April 30 which were reported in its US Retail Pet Foods segment.
A definitive agreement between Smuckers and Nexus Capital, signed by Nexus on Dec. 4, is subject to a working capital adjustment and one-time cash tax benefit to be realized upon the final sale of the brand. The deal includes all pet food products sold under the Natural Balance brand, including trademarks and licensing agreements.
"We are extremely excited by the opportunity to acquire the Natural Balance business," saidDamian Giangiacomo, partner at Nexus. "We believe in the brand's strong legacy and the ability to reinvigorate the business as an independent company in partnership with the strong management team we have assembled."
Select employees will leave Smuckers to join Nexus Capital to continue supporting the brand. Brian Connolly was announced Dec. 4 as the new chief executive officer of Natural Balance.
"Brian played a critical role on our deal team throughout due diligence and crafting the go-forward strategic and operating plan for the business," Giangiacomo said. "Brian's successful 20 years of experience in pet food as the co-founder of Castor & Pollux and former board member at Merrick Pet Care ideally position the Natural Balance brand for continued relevance with pet specialty retailers and pet owners."
Connolly added,"Natural Balance has long held a leading position as a pioneer in the premium pet food industry. I look forward to working with the Nexus and Natural Balance teams in a new phase of investment, innovation and increased commitment to the pet specialty channel and its customers."
The Natural Balance brand includes premium dog and cat food and treat products. Under The J.M. Smucker Co.'s ownership, the brand underperformed in terms of sales compared to the CPG company's other value brand dog food, cat food and pet treat brands. Natural Balance was acquired by Smucker's as part of its acquisition of Ainsworth Pet Nutrition in April 2018.
"The divestiture reflects our strategy to direct investments and resources toward areas of the business that will generate the greatest growth and profitability," said Mark Smucker, president and chief executive officer of The J.M. Smucker Co. "Today's announcement helps the Company further focus on the core brands within our pet food and pet snacks portfolio including Rachael Ray Nutrish, Milk-Bone and Meow Mix among others, which together create a unique portfolio with significant long-term growth potential that meets consumer needs across value, mainstream and premium offerings."
The transaction is expected to be finalized in the third quarter of Smuckers fiscal year, which will be in early 2021 at the latest. The company said it anticipates the earnings impact will be immaterial regarding this divestiture, and plans to discuss the financial impact as part of its next earnings report in February 2021.
Smuckers said it expects the divestiture to dilute its adjusted earnings per share (EPS) by between $0.05 and $0.10 on a full-year basis.
Recently across all product categories, the company reported a 4% year-over-year increase in net sales from $1.96 billion to $2.03 billion in the second quarter of the companys fiscal 2021, ended Oct. 31, 2020.
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Natural Balance and Canidae Join Forces Under Ethos Pet Brands
Premium pet food brands reinforce their commitments to the highest quality nutrition
BROWNWOOD, Texas, Aug. 15, 2023 /PRNewswire/ -- Ethos Pet Brands, the new parent company created by the merger of industry-leading brands Natural Balance Pet Foods, Inc., and Canidae Pet Food Company, was unveiled today. The combination will leverage both companies' shared passion for improving the well-being and lives of pets through simple nutrition, responsibly sourced ingredients, and protein-rich products.
"Ethos," the original and long-standing name ofCanidae's manufacturing facility in Brownwood, Texas, reflects both companies' character, honesty and integrity while representing their commitment to providing high-quality nutrition and premium ingredients.
Natural Balance, known for its Limited Ingredient recipes and Original Ultra product lines for dogs and cats, and Canidae's Pure, Goodness, and All Life Stages products developed for dogs and cats of all ages, offer complementary yet differentiated comprehensive food solutions sold through the pet specialty, independent and ecommerce channels. The state-of-the-art Brownwood facility, opened in 2012, will now manufacture products for both brands.
"Ethos Pet Brands marks the collaboration between two exceptional companies recognized for their best-in-class offerings for pet parents and their beloved pets," said GregShearson, chairman of the board, Ethos Pet Brands. "The Ethos Pet Brands leadership team was thoughtfully assembled and represents deep experience in the pet specialty space. I am confident they will build upon this strong foundation and guide this new company into a promising future."
Natural Balance andCanidae first announced plans to merge in March 2023. Natural Balance has a 30-year history of developing premium products with high-quality, protein-forward ingredients spanning dog food, cat food, and treats. For the past 25 years, Canidae has offered dog and cat food products focusing on goodness for pets and the planet through regenerative agriculture and sustainable operations.
As part of the transaction,L Catterton, a leading global consumer-focused investment firm and majority shareholder of Canidae, and Nexus Capital Management, an alternative asset investment company and majority shareholder of Natural Balance, each contributed new growth capital to support the successful integration and strategic long-term expansion of the combined company.
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About Natural BalanceFounded in 1989, Natural Balance Pet Foods, Inc. is a premium pet specialty brand with a complete offering of pet foods for both dogs and cats. The Natural Balance product line comprises over 100 dog and cat food and treat varieties, including Limited Ingredient, Original Ultra, and REWARDS. Natural Balance delivers quality, safety-tested food in every bag. Their Feed with Confidence Program provides comprehensive, on-demand safety testing data to help eliminate wonder or worry. Their team of Registered Veterinary Technicians is available via online chat and phone to answer questions and ease concerns. Visit naturalbalanceinc.com for more information.
AboutCanidae Pet Food CompanyFrom the first truckload of food delivered to the latest batch of pet food cooked in their pet nutrition plant in Brownwood, Texas, Canidae's story is one to be proud of. Canidae was founded in 1996 by two pet owners who knew they could make pet food better. Better nutrients. Better flavor. Better for our dogs and cats and better for us all. They've been committed to quality ever since. That commitment is upheld today in more than just their nutrient-rich, premium pet food. It inspires everything they do, from the land they harvest and the farmers they work with, to the people they employ and the local pet food stores they partner with. All of Canidae's products are vet-reviewed high-quality and perfectly balanced for optimal health at an affordable price point with no fillers, artificial flavors or artificial preservatives. Canidae is partnering with US farmers and green technology companies to bring new, sustainable practices to pet food including lowering pesticide use, reducing runoff and adopting regenerative farming practices. For more information on Canidae, please visitwww.canidae.com.
AboutL CattertonLCatterton is a market-leading consumer-focused investment firm, managing approximately $34 billion of capital and three multi-product platforms: private equity, credit, and real estate. Leveraging deep category insight, operational excellence, and a broad network of strategic relationships, L Catterton's team of more than 200 investment and operating professionals across 17 offices partners with management teams to drive differentiated value creation across its portfolio. Founded in 1989, the firm has made over 250 investments in some of the world's most iconic consumer brands. For more information about L Catterton, please visit www.lcatterton.com.
About Nexus Capital Management LPNexus is an alternative asset investment management company based in Los Angeles, California that was founded in 2013. Nexus employs a flexible investment mandate that focuses on long-term value creation by partnering with leading management teams and businesses across the consumer, education, business services and industrials sectors. For more information on Nexus, please visitwww.nexuslp.com.
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A Deeper Look at Pet Industry Mergers and Acquisitions from the Past Year
As predicted by pet industry observers in 2019and despite the COVID-19 pandemicthe pet industry was flush with mergers and acquisitions (M&A) in 2020 and into 2021, with many brands popular in the pet specialty channel changing hands. Companies, from existing pet product manufacturers to private equity investors, sought either to expand their market share in particular product categories or penetrate segments that were new for them.
The burst of activity seems a testament to the industrys alluring strength and what seems like never-ending growth. Nonetheless, pet specialty retailers will be keeping a sharp eye on brands that are under new ownership, looking for assurances of continued support and product integrity. And in some cases, they may be looking for brands to step it up.
Our executive team follows several pet industry trade periodicals, and we evaluate each merger and acquisition separately from a quality of product and relationship perspective, said Rob Flanagan, president of Wag N Wash, a specialty retailer offering grooming, retail and self-wash services in nearly 20 locations nationwide.
Typically, we wait 12 to 18 months after M&A to see how the logistics are worked out, he added. As long as the quality of the product is the same, and we maintain the same strong relationship with the vendor partners, M&As are often a positive.
The past year saw a host of manufacturer acquisitions, particularly on the nutrition side of the industry. Some notable ones include: Whitebridge Pet Brands completing its acquisition of supplement maker Grizzly Pet Products in early March, J.M. Smucker selling its Natural Balance premium pet food business to private equity firm Nexus Capital Management LP in February, and premium pet food manufacturer BrightPet Nutrition Group purchasing MiracleCorp in January.
Vic Mason, president of trade organization World Pet Association (WPA), points to the COVID-19 pandemics effect on the industry as a driver of changing market dynamics.
What the pandemic did was add fuel to the steady fire of the industry, he said. While the pet industry was already doing well pre-pandemic, the pandemic provided a new motivation for large corporations to acquire products and solutions that appeal to our new normal. The industry is at a critical juncture; we have a tremendous opportunity to seize the day and make the most of these new trends.
Whitebridge Pet Brands is a prime example of a rapidly growing company that is taking on brands in a variety of categories and seizing opportunities. The company was founded in 2015 with the merger of Cloud Star, a pet treat manufacturer, and Petropics, maker of Tiki Cat and Tiki Dog. Since then, the company has acquired several brands in the pet food and treat categories, including Crazy Dog, Dogswell, Pet Botanics and Buddy Biscuits.
We are always looking for companies and brands that complement our existing portfolio and have good growth potential at retail, said Olivier Amice, CEO of St. Louis-based Whitebridge Pet Brands. Through research, we discovered this amazingly fast-growing and, we believe, untapped category of pet supplements, which led us to conversations with Grizzly Pet Products, a leader in that category.
Whitebridges recent acquisition of Grizzly Pet Products is the companys first foray into the supplement category.
At Whitebridge Pet Brands, we want to help people bring health and happiness to pets through better nutrition, which we believe is natural and minimally processed foods, complements and treats, formulated to the specific needs of dogs and cats, Amice added. Supplements were a natural extension of our portfolio, and Grizzly products delivers on our promise to both pets and people.
In evaluating what mergers and acquisitions activity indicates about the pet industry, Mason asserts that its important to note the type of activity happening.
For example, in 2018, C.J. Foodsa large private-label premium pet food manufacturerpurchased Lortscher Animal Nutrition, an ingredients supplier, he said. Now we are seeing the opposite. In January of this year, BrightPet Nutrition Group purchased MiracleCorp, a maker of premium pet food and equine products. Similarly, in December of last year, Barkbox and Bark Eats merged with North Star Acquisition Corp., making it a publicly traded company. What weve seen in these last two mergers is that big companies are acquiring smaller playerswhether they are specialty retailers or have a share of the e-commerce marketwhich integrates the supply chain and demonstrates the value of premium products and convenient delivery.
Nexus Capital Managements recent acquisition of Natural Balance from corporate giant J.M. Smucker, in a sense, reverses the common trend of larger corporations snapping up small independent brands.
We bought a specialty brand from a big company and are bringing it back to being an indie pet brand, said John Sturm, chief revenue officer for Upland, Calif.-based Natural Balance Pet Foods.
The brand is planning to be faithful to its roots by focusing on the pet specialty retail channel and independents. Sturm said Natural Balance will not head toward grocery or mass-market retailer shelves. Natural Balances new leadership team, which comprises professionals with experience specific to specialty pet retail, will help the brands growth, he added.
There is nothing here that we cant improve upon, he said. We believe [Natural Balance] can once again be a favored pet specialty brand. There is a ton of room to grow if we work on innovation and the brand. We want to win pet specialty and indie pet.
As companies work toward integrating newly acquired brands into their operations, the results of which remain to be seen, the impact of the industrys M&A activity is clear, according to Mason.
In terms of what this means for the health of the industry, I think we are all in agreement that the pet industry is in great shape and is looking towards a continued vibrant future with consumer demand driving corporate decisions, he said.
