Private equity firm Creo Capital Partners LLC is actively pursuing acquisitions in the organic space, says partner Rob Holland. The Los Angeles-based sponsor focuses on all types of food service, including logistics and retail businesses. In 2013, Creo acquired ZD Bottling LLC, a producer and wholesaler of salsas, through its portfolio company Flagship Food Group LLC. That took place on the heels of Creo's acquisition of Atlantic Foods Group Ltd., a distributor of various food products for retail and restaurant customers.
Moving forward, Holland expects other buyers to continue focusing on acquiring companies that source and sell organic foods, as well as products that are non-GMO (genetically-modified organism). Recent natural food deals include the Hillshire Brands Co.'s (NYSE: HSH) April deal for Van's Natural Foods, a maker of better-for-you foods, and TPG Capital's $394 million deal for the parent company of Gelson's markets, which specialize in natural and organic food.
What trends are we seeing in the food space?
I think what's happening at a high pace is the focus on organic and non-GMO. Those have been buzzwords that we've all heard for years, and it's just now a place where Wal-Mart Stores Inc. (NYSE: WMT), Kroger Co. (NYSE: KR), Costco Wholesale Corp. (Nasdaq: COST) and all of the other very big retailers are really putting an emphasis. Brands and businesses that have built themselves up on sourcing and selling organic food products are extremely hot. They are all targets. The other thing that's interesting, it's coming over from Europe, is the certification that food plants need to have to be competitive. Whether it's BRC (British Retail Consortium) or SQF (Safe Quality Food) or organic or antibiotic-free, you see a real premium being paid for the companies that have those certifications.
Are we going to see more M&A in the food logistics market?
There is a real shortage of freight carriers, as the regulations have become stricter, field costs have continued to climb and the truck driver population dwindles. As the regulations are getting tighter, small individual players in the trucker brokerage space are getting squeezed out because they can't keep up. Consolidation is occurring and there's a very limited supply. If you're a food company and you are trying to get your product shipped from the manufacturing plant to the warehouse, there are fewer companies to call because of the consolidation, and there's also less capacity.
How is Creo incorporating these trends into the business?
We are actively pursuing a couple of acquisitions that play into the organic space and the gluten-free and non-GMO space. We're pursuing in the acquisition standpoint, and also from the standpoint of developing new products within our businesses.