Food Business News - June 7, 2011 - (Page 57)

Industry Seeking opportunities Richard Lenny brings his food industry experience to a private equity firm middle market T he food industry is ripe with opportunity to generate growth from businesses spun off from larger companies or to nurture smaller entrepreneurial companies into successful large businesses, said Richard H. Lenny, an operating partner at Friedman Fleischer & Lowe, a San Francisco-based private equity firm. Mr. Lenny has more than 30 years of experience in the food processing industry, having held leading executive positions at Kraft Foods Inc., Nabisco, The Pillsbury Co. and The Hershey Co. His most recent role was as chairman, president and chief executive officer of The Hershey Co., from 2001 to 2007. In a recent interview with Food Business News, Mr. Lenny spoke of his plans for F.F.L. and reflected on his career in the food business. Also participating in the interview was Nancy G. Ford, an F.F.L. partner. Elaborating on the strategic vision of F.F.L., Mr. Lenny said that middle market companies often lack the skills of larger businesses around a number of key areas, such as brand building, restructuring the business system or developing organizational capabilities. “If we believe in the statistic that 80% of new products fail, yet we all admit that we have greater marketing insights than in the past, it begs a question — why?” Mr. Lenny said. “Often the reason is companies try to extend brands well beyond where consumers want them to extend. For food companies, close-in line extensions have a much greater allure because of the smaller investment required compared with the cost of establishing a new brand.” The single largest obstacle for growth in the food business is the difficulty some companies have introducing new products with relevance to consumers, he said. Against this backdrop, established brands are facing increased competition from private label, Mr. Lenny said. “Retailers are really using private label to create brand loyalty and retain customers,” he said. “That is creating issues for many branded product companies.” The intensive pursuit of sales growth by the largest consumer product goods companies lies at the heart of the opportunity seen by F.F.L., which has about $2.5 billion under management. F.F.L.’s interest in relevant brands shed by large consumer packaged goods companies is hardly a new phenomenon. Major transactions of recent years that fit such a description include several brands acquired from The Procter & Gamble Co. — Duncan Hines, by Aurora Foods, Inc.; Folgers Coffee, by The J.M. Smucker Co.; and the pending acquisition of the Pringles brand by Diamond Foods, Inc. “Sometimes people say, ‘Let’s look at orphan brands,’” he said. “But that’s more of a pejorative term. Smucker’s has done a fabulous job executing a buy-andbuild strategy, finding businesses that don’t necessarily fit the strategic goals of other C.P.G. companies.” Asked to drill further into the kind of brands or businesses that would interest F.F.L., Mr. Lenny said the group also would be interested in emerging brands. “Whether it is high growth ‘on trend’ categories, such as snacks, confectionery and health and wellness, we are very interested in opportunities relevant to consumers today,” he said. “Salad products, sauces, cereals or packaged dinners would be examples.” Ms. Ford, F.F.L.’s partner responsible for consumer product companies, cited the firm’s experience with Discovery Foods, created through the combination of two Asian foods businesses. The two acquisitions were VIP Sales Holding Corp. in August 2006 and Discovery, acquired two months later. VIP sells frozen Asian entrees under the Tai Pei brand as well as VIPbranded and private label fruits and vegetables. Discovery sells frozen Asian appetizers under the Ling Ling brand. The company’s customers include club stores, mass retailers, supermarkets and natural foods stores. The combined business was sold in 2011 to Windsor Quality Food Co., a company specializing in a variety of ethnic foods. Ms. Ford said many aspects of the food industry remain attractive, even if the overall sector is a mature one. “Food is very large and stable, both of which can be positives for growth investments,” she said. Having started his career at Kraft Foods Inc., Mr. Lenny joined The Pillsbury Co. in 1995 when it acquired Pet Co., based in St. Louis. “It was a transformational acquisition,” Mr. Lenny said. “Pet owned the Progresso and Old El Paso brands.” At the time of the $2.6 billion transaction, Pillsbury was owned by Grand Metropolitan P.L.C. The Pet acquisition was aimed at diversifying Pillsbury’s portfolio of large food brands. Mr. Lenny was named president June 7, 2011 FOODBUSINESS NEWS ® 57

Table of Contents for the Digital Edition of Food Business News - June 7, 2011

Food Business News - June 7, 2011
House bill cuts food safety funding
Enhancing water’s value
Wet weather muddies corn outlook
Web Contents
Editorial - Quest for ‘whole truth’ on food prices in France
MyPlate steps up in simple fashion
Breaking down MyPlate by food groups
Lawmakers look to halt sale of Lazy Cakes
McCormick to enter joint venture in India
Cal Pacifi c acquires SunOpta frozen fruit assets
Cargill Kitchen Solutions expanding in Iowa
F.M.I. hires new v.p. of food safety programs
Sealed Air to acquire Diversey for $4.3 billion
AdvancePierre Foods buys Barber Foods
Cargill acquires German chocolate business
Calavo to buy Renaissance Food Group
U.S. Foodservice acquires Great Western Meats
Clear sailing for Hain
Seneca Foods earnings down sharply in 2011
April red meat production down 4% from year ago
Sbarro now exploring alternatives to bankruptcy plan
Sherman Miller promoted to c.o.o. at Cal-Maine Foods
Nestle Health Science to acquire pharmaceutical maker
Emerging markets propel Heinz’s fi scal 2011 earnings
U.S.D.A. lowers cooking temp for some meat cuts
Campbell Soup focusing on volume sales, brand building
Buyout fi rm to acquire California Pizza Kitchen
Sanderson Farms suffers second-quarter loss
Wet weather muddies corn outlook
House bill cuts food safety funding
House panel seeks reduction in W.I.C. funding in fiscal 2012
Seeking middle market opportunities
Clear and concise
Ingredient solutions help keep it simple
Identifying natural partners for stevia
$tevia $upplier$ $eek profi t$ through international growth
Brain health for baby boomers
Bottled water volume, market share grew in 2010
Study recommends children should avoid energy, sports drinks
V8 introduces energy beverages
Smucker, Starbucks raising coffee prices
Nestle launches Aguas Frescas bottled beverage
Jamba introduces coconut water-based beverages
Enhancing water’s value
Gluten-free grains momentum
Balance Bar adds Café line
Pasta Prima launches two ravioli lines
Land O’Frost debuts Wrap Kit
Franz introduces artisan bread
Kraft launches Newtons Fruit Thins
Farley’s & Sathers adds ‘Splashers’
Häagen-Dazs introduces 2011 flavors
Mars updates Kudos granola bar line
Lifting of Russian export ban pressures world wheat market
Ingredient Markets
Packaging formats focus on convenience
Technology enables ultrasonic sealing
Ingredient’s small size aids in salt reduction
AKFP now offers arrowroot starch, pea starch
Tate & Lyle to resume U.S. sucralose production
Non-dairy ingredients achieve pareve certifi cation
Ad Index
Food Business in the News

Food Business News - June 7, 2011