Kodiak Cakes purchased by private equity firm L Catterton

Dive Brief:

• Pancake maker Kodiak Cakes is being acquired by private equity firm L Catterton for an undisclosed amount, the companies said in a statement. 
• Kodiak has expanded into waffle mixes, frozen waffles, oatmeal, baking mixes and a variety of snacking products. Its better-for-you offerings are currently sold in 26,000 retail locations, including Target, Walmart and Costco.
• The sale comes as the pandemic has increased consumer demand for healthier products. At the same time, people are spending more time at home making food, with breakfast among the biggest beneficiaries.

Dive Insight:

Kodiak began when eight-year-old Joel Clark began selling his family’s hand-milled flapjack mix door to door from a little red wagon. Today, the fast-growing Kodiak’s revenue has increased more than 50 times since 2013 when the brand appeared on the television program Shark Tank.

While little is known about the company’s sales or how much L Catterton is paying to acquire its majority stake, it’s not hard to see why Kodiak — which has long been rumored has an acquisition target — was purchased.

It’s a quickly growing brand that is benefiting from consumer demand for healthier food and the fact that people are spending more time at home during COVID-19. Kodiak also has thrived because its products use healthy ingredients like whole grains and are loaded with protein. 

Kodiak’s existing shareholders, including Sunrise Strategic Partners, Trilantic North America and the company’s founders and management team, will continue to own a significant minority stake.

L Catterton is no stranger to buying and selling in the CPG space.

Nearly a decade ago it sold Plum Organics to Campbell Soup. In 2017, it divested Ferrara Candy, the maker of Brach’s, RedHots and Trolli, to Nutella maker Ferrero. And last November, McCormick & Co. purchased hot-sauce maker Cholula from the private equity firm for $800 million. Other current and and former investments include Kettle Chips, YoCrunch and Sweet Leaf Tea.

The private equity firm’s previous experience in food was a big reason Kodiak decided on a sale. “L Catterton shares our vision, and their track record of helping grow iconic CPG brands makes the firm an ideal partner for Kodiak as we continue to propel our business forward,” said Clark, who today serves as CEO.

Kodiak will undoubtedly benefit from L Catterton’s ability to tap into its industry connections to build brands and increase sales. Other firms and countless startups are entering the better-for-you breakfast and snack categories as well, so Kodiak, despite its reputation, will face cutthroat competition going forward.

Most private equity firms acquire brands or companies with the goal of boosting their value before eventually selling them later on with a profit. L Catterton has a vested interest in seeing Kodiak succeed so it can gain financially from its investment. The fact that existing investors of Kodiak, including its founders and management team, plan to retain their stake shows they believe in the long-term prospects of the business and would continue to benefit from any success.

Healthier offerings have long been an attractive acquisition target. Bar maker Kind was purchased by Mars for an estimated price tag last year that valued it at more than $5 billion. In March, Nestlé purchased functional beverage maker Essentia Water. And just last week, Hershey agreed to buy low-sugar confectionery brand Lily’s as part of its efforts to increase its portfolio of better-for-you confections. 

For food startups in the right space at the right time, they have the upper hand to be more selective in finding the perfect buyer and price tag for their business. After years of reportedly saying they were not open to a sale, Kodiak’s investors have apparently decided the right time is now.