Sovos Brands CEO Succeeds in Adopting ‘One-of-a-Kind’ Disruptive Products
During his nearly three decades in the CPG space, Todd Lachman saw with his own eyes that big brands were ceding sales and market share to smaller, on-trend products that emphasized naturalness and contained a larger list. short of recognizable and healthier ingredients.
Sensing a lucrative business opportunity, the former Mars executive, Kraft Heinz and Del Monte founded Sovos Brands in 2017 to acquire and build disruptive “one-of-a-kind” brands specializing in high-end offerings.
Barely four years later, this intuition is bearing fruit. Sovos’ portfolio of pasta sauces, pancake mixes, yogurt and frozen Italian dishes made this newcomer the fastest growing food company in the United States and gave it confidence to launch its introduction. on the stock market last week as part of a deal valuing the young company at more than $ 1.3 billion.
Sovos “is not your grandparents’ deposit of dusty, rusty old assets that are beholden” to the past, Lachman said in an interview on Sept. 23, the day the company went public. “We’re really nimble, and we’re going to be nimble and get into the right categories where we can continue to drive disproportionate growth.”
The Colorado-based company, which takes its name from the Latin word for “one of a kind,” began by acquiring two premium Italian food brands: premium sauce brand Rao’s Homemade and Michael Angelo’s Gourmet Foods in 2017. The Noosa yogurt brand became a part of Sovos in 2018 and Birch Benders were added to the fold last year, with revenues up 15% since the acquisition.
Lachman said Sovos, which valued its IPO at $ 12, decided now is the time to go public in order to acquire talent, open up access to new forms of capital and add liquidity. on its balance sheet for acquisitions.
“Now is the right time for a company like ours, which is at the forefront of a new approach to packaged food, to enter this field,” he said.
The company made a profit for the year ended Dec. 26, 2020, with net income of $ 10.8 million on net sales of $ 560 million, compared to a loss of $ 27.1 million on $ 388 million in sales over the previous year. Sovos has profited with other CPGs from the recovery in the food space as consumers stockpiled ingredients to prepare meals at home during the COVID-19 pandemic, in many cases switching to high-end products. range.
So far, Sovos has focused on finding and purchasing disruptive brands with opportunities to rehabilitate, develop, and expand the parts of the grocery store where their products can be found. Despite their breakthroughs, Sovos’ four brands each have a household penetration rate of less than 10%, giving the company the opportunity to increase brand awareness and tout the attributes of its products to consumers around the world. aim to gain market share.
Rao’s – which developed under Sovos ownership of dry pasta sauces, frozen dishes and soups – is the # 3 brand of pasta and pizza sauces in terms of dollar sales, according to the company, per compared to No. 7 when it was acquired four years ago. since. The brand, which currently accounts for 55% of Sovos sales, plans to expand into pizza and salad dressings next year.
Noosa and Birch Benders are also among the fastest growing brands in the yogurt and pancake and waffle mix categories. Similar to the strategy Sovos employed with Rao’s, it plans to move Noosa to other products such as frozen novelties and ice cream. Birch Benders is branching out into baking mixes and icing, with ready-to-eat baked goods, chilled pastries and even spoon-fed yogurt, other potential avenues for future expansion.
Acquisitions remain a key part of Sovos’ growth strategy, with Lachman predicting that the company could “potentially average one per year in the future.” He declined to describe the types of brands Sovos were looking to buy, but said any offer would contain disruptive opportunities and would likely be adjacent to the categories it already finds itself in.
“We’re really looking for brands and going into categories that we think can almost create a category on their own,” he said, pointing to the success Sovos has had with Rao’s with ingredients like fresh basil, onions, whole Italian tomatoes and olives. oil; Noosa in a gourmet yogurt; or Birch Benders in keto and paleo. “We know what we’re doing well.”