[00:00:03] Ray Latif: Here we are in a boardroom in Manhattan, New York City. We're sitting at ACG table that belongs to the folks at ACG, and that stands for Alliance Consumer Growth. Hey, I'm Ray Latif with BevNET. I'm here for the BevNET podcast with John Craven, the CEO and founder of BevNET. And at this table that I was speaking of is Trevor Nelson, the co-founder and managing partner of Alliance Consumer Growth, or ACG for short. Trevor, thanks so much for being with us.
[00:00:28] Trevor Nelson: Thank you for having me.
[00:00:29] Ray Latif: It's delightful to be with you. And actually, you're having us is more like it at this point, right?
[00:00:34] John Craven: I am having you over as my guests, which is a delight. So thanks for coming by. You put out these nice snacks, these crunchy cookie chips and way better snacks. Tasty stuff.
[00:00:44] Trevor Nelson: Would never miss an opportunity to have some way better snacks and some cookie chips out on the table.
[00:00:49] Ray Latif: It sounds like you're endorsing the products.
[00:00:52] Trevor Nelson: Way better snacks. You can't get better. I don't know. Just made that up.
[00:00:56] Ray Latif: Now, your firm is a private equity firm that invests in better for you, healthy brands that have mainstream appeal. Is that accurate?
[00:01:05] Trevor Nelson: That's a really nice way to say it. We don't sort of state the mission that way. We're really out trying to find what we believe, just our perspective, but what we believe to be the most exciting emerging brands. And as you guys know, and many folks out there would know, a lot of the growth and excitement today, especially in food and beverage, has to do with things that are better for you, better products, but also have elements of health and wellness that are very evident.
[00:01:34] Ray Latif: Now you've invested in a bunch of brands. How long has ACG been in existence?
[00:01:39] Trevor Nelson: We officially began in June of 2011, so we just passed our five-year anniversary a few months back.
[00:01:46] Ray Latif: Well, congratulations on that. Thank you. Now, on the beverage side, your most famous investment so far is Suja. Correct. The cold-pressed juice brand that's the leader and one would say the pioneer or a pioneer of the cold-pressed juice category. You recently, or at least last year, sold your investment to Coca-Cola and was it also Goldman Sachs that invested in the company? we'll start there. I mean, cause beverages is kind of what we do and what we talk about on this podcast. What made Suja the right investment for your firm?
[00:02:17] Trevor Nelson: Sure, we were really fortunate to be able to partner with Jeff Church and the team there. Jeff is fantastic and we think the world of him and he's done absolute heroics with that brand and with that business. So it was a great honor and pleasure to be involved. We looked at the juice category for some time. First of all, I guess I should just take a sit back. I mean, we are obviously out there to invest in brands that grow and succeed and then have an opportunity to be able to monetize those investments in the future. And to do so, we typically look at really large categories that are important to consumers, but also have, you know, large CPG businesses out there that would potentially acquire the businesses we invest in. So big categories are very important to us. And of course, juice. if you define it as just juice and it is an enormous aspect of beverage with very large potential acquirers out there. We'd looked at the cold pressed and HPP juice businesses for several years. They had predominantly, as you guys know, they had predominantly been juice cleanse businesses, right, where you'd buy a box of juice, it costs, you know, $150 or $200, and you're going to spend a day or two or three. Perhaps you guys have done some—you guys both look like you've done a number of juice cleanses.
[00:03:36] John Craven: Well, thank you for saying that, but no.
[00:03:38] Ray Latif: Maybe a beer cleanse. Beer cleanse. I myself have never done a juice cleanse. Probably should have at some point, but— Not yet, yeah.
[00:03:46] Trevor Nelson: Well, juice cleansing certainly was a trend, may still be a trend. And several of these brands had developed around that business. And I think what they found was that there were consumers out there that weren't necessarily committed to an entire juice cleanser, a $200 expense on a box of 12 or 20 juices or whatever it was, but who really were open to buying a 16 ounce, nine or $10 juice, believe it or not. And having that be, either a very healthy snack or a meal replacement and so forth. And that was a very interesting development for us to see that there was a consumer willing to do that. It probably really wasn't, however, until we saw that Suja was also working on a smaller, less expensive product that we got really, really excited about the future because that was less about creating a category of juice cleansing or even one-off ultra premium juice. And it was really more an opportunity to go after a much bigger established category that had been developed by brands like Naked and Odwalla and Bold House. And we thought that there was an opportunity, even if you knew nothing about what HPP was, if you knew nothing about what cold pressing was, but if you just thought, well, look, here's a multi-billion dollar category that is premium juice, Naked Odwalla Bolthouse, but there is no organic player in that category. We think we can do it with an absolutely delicious, high nutrient value, organic product. we thought there was a big opportunity. And I'm telling you exactly what Jeff Church and the rest of the team had seen, but that was one of the reasons that we felt very excited about that business. And then the other thing I should just add is that, you know, in looking at the premium juice category, the ultra premium juice category, there really wasn't an independent brand of scale. So Starbucks had already purchased Evolution, Hain had already purchased Blueprint. Blueprint. Thank you. And so when you looked around, there really wasn't, you know, there really wasn't and Bolthouse was Campbell's. And so there really wasn't an independent brand of scale. And so Suja Made for all of those reasons really made a lot of sense for us. And we were very excited about it. And it has gone very, very well. And we're super excited at this point to be some of the biggest cheerleaders for Jeff Church and the team to continue to thrive as they have.
[00:06:15] Ray Latif: Yeah, I mean, it's really interesting because a lot of people had hung their hats on Suja being HPP, on being cold press, but in the end, what really sold you guys, and perhaps others, is the organic aspect of the product. Because there hadn't been an organic Odwalla and there hadn't been an organic Naked or Bold House. Is that enough to move the needle for consumers these days?
[00:06:38] Trevor Nelson: Yeah, this is an interesting idea because I think we actually were believers and still are believers that HPP and cold pressing are important parts of the Suja story, certainly. But at the same time, when we were investing in Suja and perhaps even today, there are a great number of people out in the country here who aren't necessarily familiar with what HPP is or cold pressing is and what the benefits of those things would be. We had, you know, I say we, but really Suja or anyone in this space has the challenge of saying, well, are we going to try to go out and educate a mass number of people on the benefits of high pressure processing and of cold pressing? And what we decided was the easier way, the more available, more accessible way to communicate why it was premium and why they were why the taste might be better, et cetera, was simply to say, look, this is an organic version of what you've already buying. Behind the scenes, of course, perhaps the reason that the nutrient value was higher, the reason that the flavor was far more dynamic was because of the things that the company had invested in along the lines of HPP and cold pressing. So they're all intertwined, but from a, you know, sort of a consumer-facing standpoint, it's a much easier message in the two seconds you have with the consumer to say, well, pay, you know, 50 cents more because it's organic than it is to say, well, pay 50 cents more because not only is it organic, but let's talk about, you know, high-pressure processing and, you know, and cold pressing and so forth. I don't know that consumers had enough knowledge or may still even have enough knowledge about that to have that be really at the forefront of what you're talking to them about.
[00:08:21] John Craven: So I guess shifting gears a little bit here, some of the other things at ACG has been involved in, you've done beef jerky with Crave, you've done, I guess, fast food with Shake Shack, these cookie chips in front of us. Can you sort of talk a little bit just about kind of what the philosophy is in general with the types of brands that you get into? And I guess as kind of a component to that, I'm assuming that brands that you do get involved in, you must have some kind of value add that you bring to the table for them that would make them kind of want to work with ACG in the first place. So, you know, what sort of products and types of companies do you look for? And, you know, again, how can you help them out?
[00:09:01] Trevor Nelson: Yeah, sure. So I guess it wouldn't be insightful to just say companies that grow very quickly. The obvious, right? I mean, that is, of course, growth is in our name. So we do invest in brands that are growing and that we think there's huge additional potential growth. That's a key part of it. but really from there we really spend a lot of time thinking about where that growth is going to come from in various categories, which brands do we believe are poised to go out and you know really quite frankly change the category. Growth of the variety that we are hoping to be able to help our brands achieve is growth that in some respects disrupts categories and that's not an easy thing to do and we've been fortunate to have been able to partner with some really astoundingly amazing entrepreneurs that have really set out to change their categories. I mean, just take a look at John Sebastiani. I mean, this is a three or $4 billion category, meat snacks, packaged meat snacks. And John took this on, I don't know, four or five years ago, I guess he was starting. and really, really changed the meat snacks category. He put Crave right in there among the large incumbents and has changed, I think, the way a number of people, especially our emerging, perhaps most exciting consumer in this country, did not grow up eating Slim Jim did not grow up eating Jack Link or Oberto, but may absolutely be walking around with a bag of Crave or may absolutely have a bag of Crave in their purse. That's a pretty powerful thing that he was able to do with Crave. So for us, using that as an example, we're trying to find the brands within their categories that can have that type of an influence. And one of the things we didn't set out to do here, we didn't have the foresight, I suppose, or the vision to think about it quite like this. But one of the things that I think we're probably, my partners, Josh and Julian and I are most proud of is if you look at the 14 brands or 15 brands that we've invested in as Alliance Consumer Growth over the last five years, they all are, I guess what I would call the, you know, like a next generation type brand to whomever are currently the large incumbents. And I'll give you some examples. So if, you know, McDonald's and Wendy's and Burger King had been sort of the version 1.0 of, you know, hamburger chains, Shake Shack certainly represents, you know, that type of cuisine or concept, but for a millennial consumer. To talk about what's in front of us here, Chips Ahoy and Oreo and Keebler and even Pepperidge Farm represent sort of a version 1.0 of packaged cookie. You know, we believe that Cookie Chips represents really a millennial solution and a millennial type of product and brand because of its nutritional attributes and because of some of the things they're going to be doing with flavors and the packaging, and it's just something we believe that they will relate to far more so than they ever will Oreos, even if Oreo creates a really thin, skinny cookie.
[00:12:11] John Craven: So you're telling me there's something wrong with chocolate chip cookies and Oreos that needs fixing, basically. Yeah, I mean, look— And look, these things are super tasty. I think I had, like, six bags of those at Expo East.
[00:12:21] Ray Latif: The crispy—what are they called again? Hanumex? baking crunchy cookie chips. Cookie chips, yeah.
[00:12:28] Trevor Nelson: Cookie chips, yeah, is the brand. No, obviously nothing wrong per se with Oreos are delicious, Chips Ahoy is delicious, but we just believe it can be done better. If you were to sit down and eat some Oreos or have Chips Ahoy in front of you, I think nine or 10 consumers out of 10 would think that this is just a better experience. Sure.
[00:12:51] Ray Latif: I'm sitting here and I'm hearing your business strategy. I'm hearing your investment strategy. I'm saying, well, this sounds kind of obvious, doesn't it? You know, it sounds like this is a really not complex. I don't want to call it basic, but it sounds like a business strategy and investment strategy that that is pretty intuitive that you want to sell and you want to invest in brands that are better than. Is it more complex than that? I mean, is there, I guess, you know, you're, you seem like a really intelligent guy from the, from our interactions and, uh, I mean, looks can be deceiving. But you know, how much math is really involved in what you're doing? You know, how much, how much economics is involved in what you're doing?
[00:13:29] Trevor Nelson: You're absolutely right. If we are doing our job well, it should seem highly intuitive. It should seem in many respects simple. You could look at ACG business like Shake Shack or Crave, I suppose, or Suja or Barkthins, you know, and many others. We haven't really talked about some of the things that we've invested in on the personal care and beauty side, but you could look at those, I think, especially after the fact and say, you know, yes, who wouldn't have wanted to have invested in that that seems obvious. I think for us the the part that is a little less apparent is number one finding these brands when they're very young and having a view on the category and having an internally generated investment thesis which we spend a lot of time working on. so that it's easy for us to go out, or not easy, but it's possible for us to go out and find these brands even when they're in their infancy, even if that means we're not going to invest in them for one or two or three or four years into the future. And I'll give you a great example, which is Barkthins. We invested in Barkthin's, gosh, it would have been March of 2014. And the quick story is that two years later, it sold to Hershey in what was a very successful outcome. And the reason I think we had gotten comfortable investing in Barkthin's when it was only about five months old, which is very, very early for us, despite the fact that it was already doing a pretty extraordinary amount in revenue. was that we had spent about a year prior to our investment in Barkthin's trying to develop an investment thesis around sweet snacking. Prior to Barkthin's, there weren't a lot of other brands out there talking about sweet snacking. There was of course Salty, there was Salty Snacks, so tortilla, pretzel, potato chip, et cetera. There were brands out there who were doing chocolate confection and candy. And there were, of course, plate chocolate businesses, which are things like all of the sort of fancy high-end chocolate bars that you see at Whole Foods. And our belief was that there was a real convergence happening around those things, that the salty snack guys were trying to come out with line extensions that incorporated chocolate and things that were more indulgent, plate chocolate bar businesses were, you know, may have had delicious premium chocolate, but many consumers were actually using them in a medicinal way. So a person gets done with lunch, they need their chocolate fixed, they reach into their purse and they break off a little piece of, you know, dark chocolate and there they've had something that's both indulgent and theoretically better for you if it's dark chocolate. So that was happening, but those consumers don't have a high degree of engagement with their, it's not a lot of fun, it's just something that they're doing. And then the candy folks, all of the mainline candy folks, so think of all the brands of Hershey and Mars and Nestle for that matter, were trying to go away from being construed as candy bars and they were trying to be more snackable and chief evidence for that would have been... this trend among Hershey and Mars, especially in their sub-brands, to have upright resealable bags of unwrapped minis, right? So perhaps when we grew up, you know, we would go into the, as a, you know, eight-year-old, we'd go into the drugstore with our mom or dad or what have you and we'd say, hey, may I please have a Snickers bar?
[00:16:59] Ray Latif: That was about 10 years ago for me.
[00:17:01] Trevor Nelson: Okay, got it. And so, you know, our understanding really is that market of people who want to go buy a king-size Snickers bar at two in the afternoon is certainly much smaller than it used to be. And the question is, can you provide somebody with an indulgent snack-like experience, which is in a way for them to feel good about treating themselves in that way. And so that had been our thesis and we were out hunting for something just like Bark Thins. And I think because of that, we were able to
[00:17:27] John Craven: See it and know almost immediately that it was that it was what we were looking for So for something like that the fact that you have a thesis on this already Which um, could you share that with us?
[00:17:39] Ray Latif: If you can just make a printout and we could have candy thesis.
[00:17:42] John Craven: Yeah, sure.
[00:17:43] Trevor Nelson: Sure about like candy Yeah, I've got them on note cards. You can just take one when you leave.
[00:17:47] John Craven: There you go I guess the fact that you have a thesis on on a category like that speaks to kind of what you guys are doing behind the scenes, right, in advance of investing in a company. With the different categories that you're in, I don't know, is there sort of a realm that you're kind of constantly developing something similar, you know, a thesis on whatever it might be, some other snack food or, I don't know, personal care? Like, is that a big part of what kind of, you know, differentiates ACG from another, you know, private equity group that's not focused on the space?
[00:18:24] Trevor Nelson: Well, I mean, certainly we've got some really outstanding peer institutions in the consumer private equity world. And without knowing their inner workings, I have to believe they're all having similar type discussions that we are. But certainly if we were looking at what we do or what some of our peer consumer private equity firms are doing, I've got to believe that we would have at least a little bit of an advantage over firms that are purely generalist and looking at the consumer space for the first time. I think that's probably probably true.
[00:18:55] John Craven: And I guess, do you go to something like, you know, an Expo East and come back and, you know, we're here in your office, I don't know, set off people saying, hey, we need, we need to figure out whatever category that you might see, like, how do these things kind of bubble up to the radar?
[00:19:09] Trevor Nelson: Yeah, certainly the trade show. I mean, a lot of ways, by the way. I mean, you know, just being, you know, very consummate, avid, inquisitive consumers ourselves, my partners, Josh and Julian and I, as well as our team here, we're in the stores all the time, photographing things, looking around. We're trying constantly to put our finger on trends and new products and explore those things. So it's really sort of a constant, exercise in seeing what's out there in mapping sub-verticals of the consumer landscape and asking ourselves, you know, what is this category or sub-category? What's it going to look like in five years? And is there an opportunity for the large incumbent brands to be disrupted somehow? And Expo, East and West, trade shows in general are great places to go and see everything all together. And so sure, we come back from Expo and compare notes and see, you know, if there are ways that we can, you know, further some of the investment theses that we have, or maybe there's some brand new ones and some things that we have to explore and track down, so.
[00:20:13] Ray Latif: You've mentioned purse a couple of times, craved jerky, someone reaching into their purse to pick up some craved jerky or some bark thins. How important is the female consumer to your investment theses?
[00:20:24] Trevor Nelson: You know, very important. There's no sort of no gender bias toward females per se.
[00:20:30] Ray Latif: There are man purses, but I'm talking about female purses.
[00:20:33] Trevor Nelson: European carry-alls is what I prefer to call my man purse. Well done. Thank you. No, there's no getting around the fact that a female consumer is still driving a great amount of purchasing in this country in the grocery store and in other places. We, of course, don't want to be blind to male consumers or ignorant of their buying behavior. But when you look at who's doing a good bit of the buying in this country, especially around food and beverage, it's a female consumer. And separate from that, when we think about investing in brands and then helping the brands that we invest in, More often than not, these brands are speaking to a, it's an overused term of course, but a millennial consumer, a next generation consumer between call it 16 and 30 or 35 years old. And so it tends to be on average a female consumer that we're most focused on. It tends to be a consumer who's, you know, 16 to 35 or thereabouts that we're really focused on speaking to, creating products for, et cetera, et cetera. And what we know, I think, and what seems to be a prevailing sentiment out there for the folks who are, you know, doing a lot of the market research on this is that those consumers, perhaps as every generation does, but as they come into their own as a force in this country, their tendencies, their way of behaving, their shopping habits and so forth, tend to seep in both directions, right? They influence their parents' generation, whether it's through the use of technology and social media, whether it's their preferences and ideas, what have you, that influences a, a Gen X generation, a baby boom generation and so forth, it also sort of seeps or trickles down to the younger generation of, believe it or not, 8, 9, 10, 11, 12-year-olds as well. So it's a very powerful thing and I think it's sort of the single most important force behind a lot of what we do. It's certainly where we spend a lot of time focusing our efforts in. how to understand that consumer and also how to market to them, how to deliver solutions to them by way of food, beverage, fast casual cuisine, personal care, beauty, et cetera, et cetera.
[00:22:50] Ray Latif: Yeah, I'm looking at your current investments and your realized investments. In other words, they're investments where you've cashed out, so to speak. Is that okay to say? Sure. Okay, cashed out it is. Exited, sold, yeah. Exited, there you go. However you'd like to say it. And, you know, Suja is the only beverage brand that you have on here right now. What beverage categories are you guys looking at as potential or at brands for potential investment?
[00:23:16] Trevor Nelson: Yeah, so we are very excited about the beverage category in general. It is not without its pitfalls, certainly. Growing, building beverage brands can be very capital intensive. It can be very, you know, extremely competitive. It can be very nuanced as we think about route to market and so forth. So, you know, we're mindful of all of those risks that are there and perhaps present themselves in ways that they might not in other areas of consumers. We watch the beverage space very, very closely and are eager to be back involved in it. Categories of focus for us have been energy, where there is a very large market, we're really talking about caffeinated products, but the energy market is large, has seen tons of growth, and I'm not sure is fully speaking to the consumer that we just talked about a minute ago, so there may be some opportunities there. We're very focused on a category which is kind of RTD meal replacement, let's call it, things that serve as a drinkable snack, which, you know, again, there've been brands that have grown and done very well there, but I'm not sure it is, I'm not sure that Alliance Consumer needs or mainstream consumers needs have been fully met yet. So there may be some opportunity there. Coffee and tea are obviously exciting and big categories that, continue to see new entrants. We sort of marvel at, you know, the multitude of new tea and coffee. I'm sure you guys see this all the time and how competitive that space is. So perhaps there's some things, some brands that will emerge there and be really exciting and compelling. So those are some of the subcategories of beverage that we're really looking at. Kombucha continues to grow. I'd actually be very curious to hear your thoughts on that category. I feel it may be one for us that who knows that we may be okay to miss somehow. Obviously there are some brands out there that have grown perhaps in spite of the naysayers out there that have grown and flourished and congrats to them on their success creating a category. I don't know that I or we have a big view on the kombucha space, you know, in general. No thesis for that one. You could form a thesis if you were a naysayer and bet against the development of the kombucha category. You were on the wrong side of that.
[00:25:40] John Craven: But I don't know. I'm not sure. I think to your point earlier, the disruption that potentially occurs is with traditional carbonated soft drinks. I think that's what... the fan and the people who are, you know, in the trenches of kombucha would say. The naysayer, of course, would say, tastes like vinegar or something similar to that. I think those are largely the kind of, you know, camps that exist for it. Whether or not it's one to miss, I guess we'll have to revisit this in a few years, right? Yeah, absolutely.
[00:26:12] Ray Latif: Now, we only have a couple of minutes left and I'd be remiss if I didn't ask you about some of your favorite drinking brands that cross your desk these days. You know, at the end of these podcasts, we always talk about some of our favorite drinks for the week and no endorsement in particular, just, you know, something we're enjoying drinking.
[00:26:32] Trevor Nelson: Look, I've for a long time been a Harmless Harvest fan. I think it's a great product. I personally drink a lot of Harmless Harvest. I drink a lot of Vita Coco. I exercise a lot and as a sort of a would-be sports drink or electrolyte replacement kind of thing, I'm a big believer in coconut water as a consumer. I'm a big fan. I end up drinking a fair bit, actually, of Orgain, but I think there are also some very exciting other brands in that category that are coming out, which I'm excited about as a consumer. But those are probably the ones I'd highlight.
[00:27:06] Ray Latif: Those sound like pretty good brands to me right now.
[00:27:08] John Craven: So we might've heard of those.
[00:27:12] Ray Latif: Trevor, this has been a really great and can't thank you enough for hosting us here in your Manhattan high rise. It's a really nice office and congratulations on all the success you guys have had and look forward to hearing about your future successes as well. Thanks gentlemen. Appreciate it. Thanks everyone for listening and we'll see you next time.
