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