From Mix1 to Bossa Nova, Functional Category Deals are Getting Done
Feb 1, 2010 12:00 PM
The functional food and beverage category has seen numerous big acquisition and investment deals in recent years, including The Coca-Cola Co.'s $4.2 billion purchase of Glaceau Vitaminwater in 2007. Although activity slowed dramatically last year, several functional category deals got done. In June 2009, Beverage Holdings LLC (the company behind the Sunny Delight brand) snatched up Bossa Nova Beverage Group, maker of super-fruit beverages, for an undisclosed sum. In September 2009, the functional drink company mix1 received a $6 million funding infusion from Highland Consumer Fund. The niche-but-growing coconut water category attracted beverage giants PepsiCo (which bought Brazil's largest coconut water company, Amacoco, in August) and Coke (which purchased a 20% stake in Zico in September).
“There is still investor interest in functional beverages related to unique ingredients,” said Janica Lane, a principal at Partnership Capital Growth Advisors (PCGA), which facilitated the mix1 deal. Risk-wary private equity investors are also focused on brands that have moved beyond the proof-of-concept stage and that are backed by seasoned entrepreneurs, noted Brian Smith, another PCGA principal. “They want to see the million-case volume, success in multiple markets, and a management team that has had historical success,” Smith said. The bottom line, added Lane, is that investors are less willing to take on risk. That means smaller companies with only $1 million or $2 million in revenue are finding it tough to attract investors — even if they have very compelling products. At the same time, the deals that are being consummated are getting smaller, Lane said. “The billion-dollar transactions are coming down to the $500 million level, and you're seeing strategics willing to come in at a much lower level than previously.”
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