When Todd Wilson joined several friends from the corporate world in 2010 to
form Gourmet Food Holdings, they were spurred on by what they saw as a gap
in the market. “Product innovation was not occurring and retailers needed a
new entrant to fill their demand for packaged seafood,” he explained. “We
started Ocean Blue with Woolworths and Costco as our founding customers. It
was important to us to operate in premium foods. We didn’t want to be in
commodities, we wanted high-value, high growth, on-trend categories.”
It went very well, but it was tough at the beginning. “We had everything on
the line. By 2018 when CPE Capital joined the share registry, we had 84
equipment finance leases in place, and a lot of liability and personal
guarantees on the table. We had also struck a healthy deal with an
international bank that funded our working capital. The launch of a second
business in 2015 – producing premium entertaining crackers under the OB
finest and Olina’s Bakehouse brands – was paid for with a working capital
facility. We had a really good relationship with the bank because they
funded business number one and had seen our track record.”
Todd says both companies were making profits within the first three to four
months of trading. “We were very frugal on costs, our infrastructure was
low-tech and we took a very commercial approach. We never sought to get
ahead of ourselves and remained solely focussed on products that returned a
maximum margin.” The partners shared the profits, taking their first
dividends from Ocean Blue in 2013-14 and in 2017 from the cracker business.
By the time CPE Capital came along however, a big chunk of capital was
required. “We needed a greenfield manufacturing site, which was a $25m-$30m
commitment, and the risk appetite of the shareholder group was different,”
Todd explained. “While some shareholders were up for it, others were fairly
nervous. We thought it was a good time to see how we could fund it
properly.”
The partners took external advice. “I wasn’t sure I wanted to work with
private equity, but we had built a very strong relationship with CPE
Capital and it became evident early in the process that we could partner
with these guys. Business is done across the table, eye-balling each other
– trust and integrity and those types of things. That’s really important to
us and I felt we could have that with these guys. They understood our model
and were there to support us. They had a track record in food, could bring
merger and acquisition expertise, provide external advice and knew about
the exit process. It would be useful to have people outside our business
and industry to check with, receive advice from and who could provide a
level of governance.”
Others were interested too, but CPE Capital won because the partners
believed they could work together. Todd liked the team. “I felt we were
aligned,” he said. CPE Capital was keen to keep the founders motivated and
economically involved. It took 70 per cent of the equity, paying a healthy
amount of cash to the founders and leaving them with a combined 30 per
cent. The founders were also aligned with CPE Capital on the future growth
plan and reinvested in the business to demonstrate their commitment.
CPE Capital’s managing director Cameron Buchanan explains: “Todd took me
through the history of what had been created. What interested me most was
the thinking that had gone into the categories they had entered, targeting
premium, high value, high growth. We had experience with branded foods,
selling into retail, so we understood what they needed. A lot of people
will say Coles and Woolworths are tough customers. They are if you are not
delivering any innovation, good category margins and leveraging growth.
But, this was a group with a significant amount of knowledge, a track
record in the corporate world and that had created two market leading businesses. First and foremost, I was impressed by the
people and the thinking that had gone into the business. We had to make
sure Todd and his founders were still very much motivated and economically
involved.
“By the time we all signed on the dotted line in July 2018, we had a really
clear plan. It was to continue giving the business the resources needed to
deliver new product development. The business was capacity constrained, so
we allocated $20m-plus of capital to build a world class manufacturing
facility and develop an export channel. We had designs on building a food
service distribution channel, but the guys did such a good job on the
export and grocery business that we didn’t need to get to the wholesale
part of the plan.”
The partnership between Todd, his partners and CPE Capital lasted three
years. A time frame for the exit was set at the start, although it came a
little earlier than originally anticipated. CPE Capital had achieved what
they set out to deliver in their growth plan for Gourmet Food. The new
manufacturing plant was built, but with a larger capital outlay that
enabled a number of additional product lines. The business had established
category leading positions in premium grocery and deli crackers, health and
chilled packaged seafood. New export markets, including New Zealand, North
America, Asia and the UK were developed. The business was also supported by
a strong management team, and sales and back-office function. The time was
right to sell to what they had always hoped would be a significant trader
buyer. It was.
With brands including Cadbury, Toblerone and Oreo, Mondelez is a
US-domiciled, global snacks business, which says its purpose is to “empower
people to snack right”. It sets out to “lead the future of snacking” by
offering the right snack, for the right moment, made the right way. Todd
still sits on an advisory board which manages the Gourmet Food business.
They call him when they need to. “We put in a good quality management team
under me and the other founders before the exit. Those guys have rolled
with the business. My COO is now the MD. Mondelez promoted him, and I am
there to support them.”
Published December, 2021