News highlights, market trends, and original data analysis related to the U.S. retail food & beverage industry … by Jay Nargundkar
In the tech world, it’s routine for startup companies that have only been around for a few years to be acquired by a large company for eye-popping sums of money. In the packaged food and beverage world, though, that isn’t as common. Which is why last week’s purchase of premium meat snacks maker Krave Jerky by Hershey for an unspecified amount, thought to be between $200-$300 million, is noteworthy.
Krave is an example of the quintessential entrepreneurial success story, started a little over four years ago by an amateur marathon runner looking for a healthy training snack. From there, things have taken off quickly, with the company racking up $36 million in sales in 2014. A recap in the North Bay Business Journal recently reported on the surprisingly broad distribution and robust production Krave already has in place:
In October 2014, Krave owner Jon Sebastiani described his company’s product vision beyond the jerky lines he already sells in Whole Foods, 7-Eleven, Safeway, Target and Kroger markets. Costco sells one-pound bags of the jerky, and single-serving bags are available in hotel mini-bars such as Four Seasons and on Virgin America airline, as well as in corporate cafeterias at Google, Lululemon and Nike. Mr. Sebastiani had developed prototypes of meat-based snack bars that would compete with mostly cereal-based bars made by Clif Bar, Kellogg’s and General Mills…
Krave Jerky products are made in five production facilities in the United States. Production, which turns two pounds of raw meat into one pound of Krave jerky, is done at an original local plant in Fairfield, and by co-packers in Idaho, Salt Lake City and Virginia, a plant that serves East Coast markets. A new production plant is scheduled to open in Kentucky in early 2015. In October, Krave had 72 employees, with 20 in its Sonoma headquarters.
While a number of stories in the popular press have lightheartedly speculated that the union of Hershey and Krave is a sign of chocolate-covered jerky to come, that’s unlikely, at least in the near-term. This deal makes business sense for both parties. According to Nielsen, meat snacks racked up $2.5 billion in sales in 2014, up 50% from 2010. Hershey is looking to diversify away from slowing sales of its traditional sugary candy and gum products, and jerky — in the upscale form that Krave is known for, touting high-quality ingredients and exotic flavors such as “basil citrus”, “chili lime”, and “black cherry barbecue” — is on-trend with demand for protein and snacking, as well as with an emerging preference by consumers for non-mainstream brands.
Krave, for its part, felt now was the right time to make a big play. Company founder Jon Sebastiani, who has confirmed he will remain on-board under the new Hershey ownership, explained his primary motivation to Fortune:
“Scale is a reason why many startup food makers opt to sell after several years out on shelves — it just gets easier when you have a food giant backing your brand.
Hershey’s products are sold in virtually every retail establishment that sells food products in America — from gas station marts and convenience stores to drugstores to supermarkets — and they are all now potential new sales venues for Krave. Combine that with the advanced supply chain of a megalith like Hershey, and its ability to secure favorable pricing on its procurement orders, and this deal makes a lot of sense for Krave.
Just don’t be disappointed if chocolate-covered jerky isn’t their first priority.