This Week in CPG - An Unexpected Mega Merger

Author

CPG WIRE
October 15, 2022

Good morning, folks. Let's get into it..

The Big Story

Most Fridays it's a struggle to find interesting consumer headlines. Yesterday, however, was an exception with the announcement of a massive acquisition: the Cincinnati colossus Kroger purchased its West Coast peer, Albertsons. Link 

Grocery M&A typically isn't very exciting. It's an analog, low margin, human-capital-intensive, and pretty lethargic industry. The Kroger/Albertsons deal is interesting because of its potential scale. For the first time in eons — assuming the F.T.C. doesn't derail the deal — one retailer could finally challenge Walmart's dominance in grocery. 

For context Walmart has about 20% of the grocery market, while Costco — a similarly ubiquitous, long-in-the-tooth retailer — has 7%. The combined Kroger/Albertsons entity would command around 16% of the grocery market. The numbers are pretty staggering: 

  • $209B in revenue

  • 710,000 Employees

  • 4,996 Stores

  • 3,972 Pharmacies

  • 2,015 Fuel Centers

Beyond scale, another interesting aspect is whether or not the F.T.C. intervenes, and if so, how emphatically? My gut reaction — based solely on the market share data mentioned above —  was that deal would proceed with minor concessions e.g. store divestitures in select markets. The more I think about it, though, the more it seems like this deal might get killed for political reasons: 

  • The usual suspects in Washington hate it. Senator Bernie Sanders went so far as to call it an "absolute disaster." Link

  • This is perhaps a cynical take but with inflation being so out of control and showing no signs of abating, is there a better distraction/scapegoat than greedy grocers trying to consolidate?

  • The F.T.C. has a fairly recent history of blocking retail M&A. Remember Office Depot and Staples circa 2015? Blocked. And they were selling Post-It Notes, not bread and water.

Time will surely tell. 

Deals

  • London-based skincare brand ARgENTUM apothecary was acquired by Ushopal, a Chinese brand accelerator and investor. Terms of the deal weren't disclosed but ARgENTUM generated more than $50m in revenue in China alone. Link

  • Another skincare brand, True Botanicals, enlisted Moelis & Company to gauge M&A interest. The brand is on pace for $50m in revenue this year. Link

  • French spirits co Pernod Ricard "significantly" increased its minority stake in Sovereign Brands, a U.S. portfolio of wine & spirits brands that includes Luc Belaire and Bumbu Rum. Pernod & Sovereign also collaborated on a new brand that will be unveiled in a few months. Link 

  • Popular Aussie breakfast brand Carman's made its first acquisition in thirty years with Fruit Wise. Link

  • Xiao Chie Jie (XCJ), a Chinese street food brand known for their soup dumplings, raised $10m led by Imaginary Ventures. Other investors include Goldhouse Ventures, Hyphen Capital, actor Simu Liu, and a number of CPG founders. Link

  • Beer, wine, and spirits giant Constellation Brands took a $1.1B writedown on its investment in cannabis company Canopy Growth. Link

  • Fireside Ventures, one of the leading VCs in India's CPG ecosystem, raised $225m for its third fund. Investments include Mamaearth (unicorn), boAt (IPO bound), and Yoga Bar (Nestle close to buying, apparently). Link

  • Beauty group Forma Brands, which General Atlantic acquired a 60% stake in in 2019, is exploring Chapter 11 bankruptcy...Link

What's New...

  • Barstool Sports unveiled its latest booze venture, Big Deal Brewing. Given the success of Barstool's other brands, watch out for this one. Link

  • Lenny Kravitz launched a good-looking sotol brand, Nocheluna. Link

  • Ridge, the company known for its wallets, backpacks, and podcast ads, broke into a new category - watches. They look pretty good too! Link

  • Plant-based pizza brand Blackbird Foods unveiled their newest product, plant-based wings. Link

  • Xiao Chie Jie, the Chinese street food brand mentioned above, launched some beautiful noodle kits. Link

  • Aussie coffee liqueur brand Mr Black, fresh off their acquisition by Diageo two weeks ago, launched a stunning new product. Link

  • SoCal activewear brand Vuori opened its first store in NYC. Link

  • New organic hard kombucha brand, Mate Maker. Good-looking cans. Link

  • Better-for-you frozen pizza bite brand Snowdays unveiled a new product, Taco Bites. Link

Distribution Quickfire 

  • Nature's Fynd launched its plant-based cream cheese nationwide at Sprouts.

  • Dried fruit snack brand RIND hit shelves at Target.

  • Plant-based chicken brand Daring partnered with Starbucks on select items.

  • CA-based Joolies launched their organic dates at Meijer.

Personnel

  • Belinda Wong is once again CEO at Starbucks China. Starbucks is at a critical juncture in China: same store sales are down and the competitive landscape is fierce.

  • Greg Bettinelli has left Upfront Ventures after eight years to join The Chernin Group, the active consumer & media investment group.

Thanks for reading along. If you have any thoughts or feedback, I'd love to hear them. 

All the best, 

Robbie @ CPG Wire