Good Eats Portfolio
Private equity firm Fenwick Brands leverages “expertise equity” to launch hot new food brands onto grocery shelves.
From snack foods and all-natural cocktail mixers to pizza crusts, meat marinades and meatless meals, the private equity firm Fenwick Brands in Birmingham provides capital to emerging brands that could become the next national consumer craze.
Fenwick Brands is a growth capital investor and operator that purchases equity interests in companies that produce consumer packaged goods or CPGs. CPGs are nondurable products like food, beverages, household goods and personal, beauty and pet care products that commonly appear on grocery store shelves.
Fenwick targets mostly smaller, regional brands that have a high potential for going national. One of those brands is Birmingham-based Moore’s Marinade & Sauces, a brand born out of a family-owned steakhouse in Jasper that is now a nationally recognized household brand.
Fenwick’s founding principal is Benny LaRussa Jr., a Birmingham native and former commercial banker who grew up in his family’s retail grocery business. LaRussa formed Fenwick in 2002, following a long tenure in the consumer, retail and financial services sectors.
LaRussa recognized a market inefficiency among businesses that needed capital while also needing strategic and operating expertise to scale.
“I realized there was a common inflection point of founders who had differentiated products but needed the brand strategy, sales, marketing skills and capital that Fenwick Brands could provide,” says LaRussa.
He says he eventually coined the Fenwick solution to this inefficiency, “expertise equity,” which remains the firm’s investment thesis.
Here’s how the Fenwick process works.
Fenwick typically invests between $3 million and $7 million of growth capital in portfolio companies for what is often a minority share in the businesses. That allows company founders and their management teams to retain control, says Director of Investments Elizabeth Stewart.
This past August, Fenwick closed its first committed fund. The firm set out to raise $30 million, but the process delivered an oversubscribed capital base of $33.5 million, Stewart says. From that fund, Fenwick made its first investment to Hannah Max Cookie Chips, a company that makes thin, all-natural snacking cookies.
Following an investment, the Fenwick firm deploys its in-house team of experts in branding, strategic marketing, financials, supply chain and retail distribution to work alongside the company’s founder and management team — helping to spur growth and create a future return on Fenwick’s investment.
“We have to be operators,” says LaRussa. “We have to be at the table. We don’t just write checks and make a passive investment.”
Fenwick’s investment and operational involvement with a company lasts an average of three to five years, Stewart says.
“We have a very flexible mandate,” says Stewart, “so we try to tailor the right structure to the organization.”
But identifying brands with the greatest potential for going national requires much research, says Melissa Baker, Fenwick’s president and chief executive officer, who has been with the firm since 2013.
“We’re very data driven and methodical about how we look at brands, how we approach them, and how we evaluate them for an investment,” Baker says.
Choosing the right brands to invest in, however, is especially chancy these days when the CPG market is experiencing a great deal of disruption. “Consumers are demanding more,” says Baker. “If you look at what matters most to consumers today, it has changed significantly, even over the last couple of years. There are the macro trends of better-for-you ingredients. Authenticity matters. Connection matters. Social mission matters. So we look at those things holistically.”
Consequently, to take advantage of the trends, Fenwick looks for brands with disruptive ability in categories that are gaining market share, Baker says. One example is Fenwick’s 2015 investment in Powell & Mahoney, a Massachusetts company that makes handcrafted cocktail mixers with natural and organic ingredients.
“There was an opportunity to bring the macro trends of craft and all-natural into a mature category and make it an affordable, mainstream option,” she says. Today, Powell & Mahoney sells the mixers at Wal-Mart, Target, Publix, Whole Foods, Fresh Market and other well-known grocery chains.
Another potential breakaway brand that Fenwick has invested in is The Jackfruit Co. The company’s founder, Annie Ryu, was attending Harvard and studying pre-med when she saw jackfruit for the first time during a trip through India. A relative of the fig, the fruit grows on trees and can weigh a whopping 100 pounds or more. It also has a neutral-tasting, meat-like texture.
Seeing its potential as a meat substitute, Ryu launched her company to create a line of meals for consumers wanting a meatless option that was also soy, cholesterol, gluten and nut free.
Baker says The Jackfruit Co. is an attractive investment because it falls into the meat alternative category, which is rising in popularity.
“It was an earlier-stage company than we would normally invest in,” says Baker, “but it had a strong founder and was in a very strong category, and so we made the investment. We saw a huge opportunity to disrupt the category with something that was authentic, had a strong social mission and had attractive consumer dynamics.”
But in addition to identifying standout CPG products, Fenwick must also find companies with founders who are open to having Fenwick’s experts working in their business on a day-to-day basis, Baker says.
“Founders are often the visionaries,” says Baker. “They’re wearing a lot of hats in the organization, and, by default, they naturally transition into a CEO role. The question, however, is whether the founder can do all the necessary things to scale the business as a CEO. Can they transition to a manager of people versus the doer, put an operational plan in place and hold people accountable to execute, or do they just want to be the visionary and face of the organization? ”
While the CPG industry continues to evolve, Fenwick’s executive team say they are optimistic about their own firm’s future.
“As long as the market tells us that there is value to be created with this investment stage, and with our expertise,” says Stewart, “we will be committed to pursuing emerging brands in the consumer sector. We’re hoping to continue raising funds and putting our operational expertise to work creating value.”
Gail Allyn Short and Cary Norton are freelance contributors to Business Alabama. Both are based in Birmingham.