Olam to buy private label spice maker Olde Thompson for $950M

Source: fooddive.com

Dive Brief:

  • Olam Food Ingredients will acquire U.S.-based private-label spices and seasonings maker Olde Thompson from Kainos Capital for $950 million. The acquisition it is expected to add $25 million to $30 million toward core earnings, Olam said in a presentation about the acquisition. The transaction is expected to close in the second quarter of the year.
  • Olde Thompson is North America’s largest dedicated manufacturer of private-label dry spices and seasonings, and acquired New Jersey’s Gel Spice last year. Olam has had a relationship with Olde Thompson for 15 years. Olam Food Ingredients CEO A. Shekhar said in a written statement the deal is a logical move, combining Olam’s sourcing and supply chain strengths with a lucrative U.S. product market. 
  • This is one more step in Olam’s transformation. Olam International, which is majority owned by Singapore’s state investment firm Temasek, started working to refocus its portfolio on ingredients products in high consumer demand in 2019. Last year, it announced it was splitting its business into two operating groups: Olam Food Ingredients and Olam Global Agri, dealing with commodity crops and animal feed. In February, Olam CEO Sunny Verghese announced Olam Food Ingredients would be listed on a publicly traded stock exchange in 2022, but the company has not yet decided where.

Dive Insight:

With a new focus and new direction for the company, Olam has been looking to spice things up for consumers — literally. After the reorganization, Olam Food Ingredients first streamlined its organization to prioritize herbs, spices and flavoring, connecting sources, flavorists and CPG makers across the world to create the flavors companies wanted.

Next, the company started looking at acquisitions to make it a leader in the space. In December, Olam Food Ingredients bought Mizkan America, a leading chili pepper company in the U.S., for $108.5 million. And the Olde Thompson acquisition followed.

This acquisition will catapult Olam to be one of the largest players in the lucrative U.S. spices and seasonings market.

Olde Thompson, a 77-year-old family-owned company based in California, has been growing rapidly to position itself as a top private-label provider. Kainos Capital, a food and consumer-focused private equity firm, acquired the company in 2018, helping increase Olde Thompson’s output and efficiency. It also facilitated the Gel Spice acquisition, which Kainos Managing Partner Andrew Rosen said in an email was instrumental in attracting Olam’s interest. The Olde Thompson team will continue at the helm of the business when the acquisition is complete, Olam said.

In an interview with CNBC, Shekhar touted the growth of spices and seasonings in the United States as a primary driver behind the acquisition. The U.S. is the largest market for spices, he said, worth almost $500 billion a year and growing at a rate of 5% over the last several years. Olde Thompson already has inroads in the U.S. market, plus connections to large retailers, which means the acquisition should quickly make money for Olam. Shekhar called it “a sizeable and very unique play.”

“Growing our offerings of private-label solutions is right at the heart of OFI’s strategy – and within that spices is one of the most attractive and growing categories,” Shekhar said in a written statement. 

Olam already is well known for its traceability data. Through the company’s AtSource program, Olam provides its customers with detail about where their ingredients come from and aspects of sourcing including soil, water usage, fertilizer, chemicals and greenhouse gas emissions. As consumers are more interested in their food’s origins and its sustainability footprint, this acqusition pulls that data to the forefront for some of the ingredients that may have less straightforward sourcing. This will draw both consumers and corporate customers looking for both authenticity and flavorful ingredients with the smallest environmental footprint.

The acquisition also helps Olam Food Ingredients build its value, which is important leading to an IPO. This deal adds depth to its offerings and shows potential investors that the company is not only dedicated to growing its sales but is also thinking ahead and capitalizing on the biggest trends.