Lost and found: Brands neglected by large CPGs thrive under new ownership

When Hershey made the decision to divest its premium jerky offering Krave two years ago, the first call executives made was to an entrepreneur intimately familiar with the brand: its founder

It took only 60 days for Jon Sebastiani to buy back Krave, paying what he described as a “substantial discount,” just five years after selling it to the confectionary giant for nearly a quarter of a billion dollars. But the purchase was far from a sentimental one; instead, it was about rehabilitating the once-thriving jerky brand.

Krave had lost market share, sales were slipping and its quality had deteriorated. The brand and the retail landscape had shifted considerably since Sebastiani last owned it.

“Our product needed a lot of replumbing and rewiring … to get it back to a spot where a customer would be like, ‘Oh, okay, now I remember what Krave used to be like,’ ” said Sebastiani, who now runs Sonoma Brands Capital, a private equity investor focusing predominantly on food. “This was not an emotional buy. This was not some form of nostalgia. It was a fundamental strategic decision that we felt that there [would be] a meaningful return on our investment.”

Krave was among the brands that turned jerky, once viewed as a cheap junk food option, into a trendy snack with consumers hungry for protein and lower-carbohydrate choices that were portable. Hershey, which was looking to grow its snacking portfolio, viewed the brand as a way to enter the emerging premium meat-snack market.

But Krave under the stewardship of Hershey, best known for its expertise in sweets like its namesake bar, Reese’s and Kisses, had lost its coveted tenderness and was “like chewing a piece of cardboard,” Sebastiani recalled.

Many retailers simply stopped carrying the brand, and sales plummeted from about $70 million when Sebastiani sold Krave to $20 million when he repurchased it. Once the trendsetter in the premium jerky space, Krave slid from being the top-selling brand, struggling as consumers drifted toward mainstream options where growth was more robust and a proliferation of competitors in the premium segment squeezed profit margins.

Hershey CEO Michele Buck was outspoken before the divestiture of Krave about challenges facing the brand. It requires “a different go-to-market model that we believe is better supported by other owners,” she said at the time.

From a sprint to a marathon

A growing number of private equity groups, companies and other investors like Sebastiani are purchasing brands being divested by large CPGs — often with the hope of turning around a once-thriving offering or nurturing a product that for years languished in the shadows of bigger or faster-growing items.

As companies tweak and in some cases overhaul their businesses, they are offloading assets for a variety of reasons. Executives may want to prioritize their most promising assets while divesting those that no longer fit with the other brands in their portfolio or deviate from their long-term strategy. A brand may have failed to deliver the expected growth or was more difficult to integrate into the existing business than originally thought. A difference in strategy also may have formed between the CPG and the leadership at the acquired company that was beyond repair.

Optional Caption

Courtesy of Krave


“The culture of many of the CPGs is they’re managing a portfolio of 10 brands, sometimes 20 brands. So to get that level of dedication from a CEO at a very high level, it’s extraordinarily difficult,” said Brian Choi, CEO of The Food Institute, a food industry media and market research company.

Unlike his first time nurturing Krave when sales were tripling annually, the “sprint” as Sebastiani calls it, has been replaced by a marathon where “the business is being built one brick at a time, one account at a time and the improvements are more subtle.” 

Since Sonoma added Krave to its portfolio, the firm has updated the packaging, added new flavors, switched to grass-fed beef to improve texture and the brand’s sustainability footprint, changed copackers and returned to the equipment that created its signature tenderness. 

“We’ve come full circle where we’ve seen a lot of acquisitions from the early 2000s, some of which have not worked out for big food brands, and they’re looking to just hive those off again.” 

Hans Taparia

Clinical associate professor of business and society, New York University

The changes, while slower than initially expected, are paying off. The brand is experiencing more repeat purchases, and market share at many retailers is expanding, Sebastiani said. A review of Krave by Sonoma Brands found the jerky is still viewed as a top premium offering in the space and has maintained its consumer loyalty — key selling points used to attract retailers. 

The snack is reappearing this year in major chains that had stopped carrying the product after sales slumped, including Kroger, Whole Foods and Sprouts. As Krave rebuilds relationships with these and other retailers, it has decided not to pass on all of the higher expenses affecting the brand from rising meat and supply chain costs.

But Sebastiani knows regaining Krave’s post in the premium jerky space will not be easy.

“There’s a sea of sameness out there right now. Krave is not as different today as it was eight or nine years ago when I had a first-mover advantage,” he said. “I’m more of a sober state of mind that this is not going to be an immediate boomerang that just comes right back where we were.”

M&A deals go belly-up

Researchers who study the food industry say the foundation for today’s divestitures started several years ago as CPGs sitting on piles of cash were dealing with slow growth in their business. At the same time, consumer trends like snacking, better-for-you, fresher foods and premium-based products were intensifying. Companies had no choice but to turn to M&A to catch up or miss out on a potentially lucrative opportunity to more nimble upstarts.

“We’ve come full circle where we’ve seen a lot of acquisitions from the early 2000s, some of which have not worked out for big food brands, and they’re looking to just hive those off again,” said Hans Taparia, a clinical associate professor of business and society at New York University.

Campbell Soup faced a similar experience as Hershey did with Krave, but the pivot proved far deeper and much more costly.