J.M. Smucker Gobbles Up Hostess 🧁

GM and Happy Tuesday, folks. Here’s what we’re covering this morning:

• J.M. Smucker buys Hostess Brands 🧁

• Bacardi bets on Ilegal Mezcal 🍹

• Molson Coors backs ZOA (again) ⚡️

• Susanne Kaufmann x Byredo coming soon 🔥

• Cuts Clothing gets into the retail game 🆕

• Chamberlain Coffee reformulates ☕️

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The Big Story 📰

J.M. Smucker, the diversified food and beverage firm that owns Jif, Folgers, Uncrustables, and many other brands, agreed to acquire Hostess Brands for around $5.6B. The deal is expected to close by the end of January.

Hostess Brands is best-known for their portfolio of delicious, artery-clogging sweet treats like Baby Bundts, Ding Dongs, Donettes, and Twinkies. They also own premium baked goods brand Voortman, which Hostess acquired for $320m in 2019, along with Cloverhill Bakery and Dolly Madison Bakery.

Despite having a rather tumultuous corporate history — Hostess filed for bankruptcy protection in 2004 and 2012 — Apollo Global Management and Metropoulos & Co. have righted the ship after jointly acquiring it for $410m in 2013.

Since this fateful acquisition in 2013, Hostess Brands has become a sort of juggernaut in the sweet baked goods category, and both revenue and net income continue to grow. In 2022, Hostess delivered net revenue of $1.35B and net income of $164m. This is compared to net revenue of $1.14B and net income of $119m in 2021. Though this is a rather small sample size, a company that’s over a century old typically doesn’t grow revenue by 19% or net income by 38%.

What Dean Metropoulos pulled off with Hostess Brands is nothing short of magic, and J.M. Smucker is paying a massive premium for this sorcery. According to Axios, J.M. Smucker is paying a whopping 17.2x EBITDA for Hostess Brands, which equates to a 59% premium compared to where shares were trading on August 25th.

This might be a hell of a premium for J.M. Smucker to pay, but in their defense there just aren’t many acquisition targets that would move the needle in a meaningful way. At least Hostess will contribute nearly $1.5B to the top line and, in the near future, a few hundred million to the bottom line.

2023 has been a banner year for big deals in the food & beverage space. Here’s quick rundown of recent ones:

• Campbell Soup Co. bought Sovos Brands – the owner of Rao’s Homemade, Noosa Yoghurt, and Michael Angelo’s – for $2.7B.

• Apax Partners scooped up Bazooka Candy Brands for $700m.

• Mars, Inc. acquired Kevin’s Natural Foods for nearly $800m.

• Keurig Dr Pepper (KDP) bought a 33% stake in La Colombe for $300m.

• Unilever purchased better-for-you desserts brand Yasso in June.

• Nestlé bought 49% of YFood at a valuation of €430.

• Diageo purchased Don Papa Rum for over $280m and an additional potential earnout of over $190m.

Deals 💰

Mergers & Acquisitions 

• Spirits player Bacardi acquired Ilegal Mezcal, the craft mezcal brand that John Rexer founded in 2006. Bacardi first took a minority stake in Ilegal in 2017. Bacardi is bullish on agave spirits — in 2018 they purchased Patron Tequila for $5.1B. Agave spirits M&A is back, baby! The Spirits Business

• Florida-based Splash Beverage Group agreed to acquire JEM Beverage Company, the Texas-based owner of Western Son Vodka. Terms weren’t disclosed but Western Son Vodka sold 309,000 9-litre cases over the past 12 months. JEM also owns a 150,000 sq. ft. production and distribution campus in Pilot Point, TX. GlobeNewswire

Fundraising

• Brewing giant Molson Coors upped its stake in ZOA Energy. ZOA is the better-for-you energy drink brand that Dwayne “The Rock” Johnson launched in 2021. Last year ZOA reported over $100m in sales, a year-over-year increase of 138%. Molson Coors will remain ZOA’s exclusive distributor. Business Wire

• Better-for-you mac & cheese brand Goodles secured $13m in funding led by L Catterton. Other investors include Gingerbread Capital, Springdale Ventures, Third Craft Partners, and Willow Growth Partners. Goodles was co-founded by Gal Gadot in 2021. The Jerusalem Post

• Brooklyn Brewery led the Series A round for Boulder-based non-alcoholic beverage brand Hoplark. Hoplark is known for their non-alcoholic beers, HopTeas, and Hoplark Sparkling Waters. BevNET

• Tongue in Peat, a Glasgow-based producer of peat-smoked tomato juice for use in Bloody Marys, closed a significant round of funding led by Ruby Capital. Smoked tomato juice is such a good idea. The Spirits Business

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What’s New 🤩

Apparel, Cosmetics, and Wellness

• Austrian skincare brand Susanne Kaufmann is collaborating with fragrance pioneer Byredo on a limited edition series of products that celebrate “the sensorial connection between skincare and fragrance.” Beauty Industry

• Popular apparel brand Cuts Clothing opened their first-ever retail store. The store is located in the West Village at 375 Bleecker St. Instagram

• The newest product from skincare brand Dieux, Air Angel, officially launches tomorrow. Their packaging is always brilliant. Instagram

Food, Beverage, and Alcohol

• Chamberlain Coffee has finally reformulated their ready-to-drink latte line. The canned lattes originally launched at Walmart in April, but the response was largely tepid due to complaints about taste and texture. The reformulated lattes are now available online and in-store at Walmart. Can’t wait to try ‘em. Instagram

• Chloe Gordon of The Dieline breaks down what makes Doladira’s packaging so brilliant. The Dieline

• Sweetgreen is launching a new salad in collaboration with artist Renee Rapp. The Renee Rapp Bowl will be available at all Sweetgreen locations starting tomorrow. Business Wire

• Lunchables, the convenience-oriented food brand owned by Kraft Heinz, is launching a new line of Grilled Cheeses soon. Instagram

Data 🖥️

• Per Beverage Insights, carbonated soft drink volume was down 3.7% for the four weeks ending on August 26th. PepsiCo and Keurig Dr Pepper’s CSD volumes were down bad, while Coca-Cola’s volume only dipped a hair. Twitter

Distribution News 🚚

• Bondi Sands, the Australian self-tanning brand that Kao Corp acquired in July, launched eight products nationwide at Walmart.

• Mexican food brand SOMOS is launching nationwide at Target later this month.