Cranberries on a conveyor belt

As long as humans have been on the planet, they have needed to eat and drink. In more modern times, the business of producing and distributing food and beverages has become a global endeavor. For many, eating and drinking is a pleasurable experience, and food and beverage processors strive to have their products associated with the joy of sharing food and drink. Now, as consumer tastes and preferences continue to rapidly evolve, food and beverage companies are finding there are many opportunities and different angles they can take to be top-of-mind for consumers moving forward.

During a recent panel discussion, select executives of family-owned food and beverage companies that recently faced ownership transitions shared their succession paths and views on the current opportunities for middle-market companies: The panelists included:

  • Tom Walzer – CEO – Saco Foods, LLC
  • Dimitri Pappas – Founder/Owner – Orchard Solutions
  • Jonathan Del Re – CEO – Lacas Coffee Company

In an excerpt from Challenges of growing and transitioning a private food and beverage company, the panelists discuss what they find attractive about today’s food and beverage industry.

What do you still find attractive about the food and beverage industry?

Jonathan Del Re: There is tremendous change going on, which I know can be unsettling, but I find it to be a fairly interesting environment because successful companies have to think, plan and evolve on many levels. I feel comfortable in the industry. There is a certain stability – it will always be here in one form or another. And if you can evolve enough, you will always be relevant.

Baker Tilly Capital: How are you addressing changes in consumer tastes and preferences?

Jonathan Del Re: For us, it is actually quite an opportunity. For one, we are sourcing and supplying a broader array of better coffees, and certified coffees, to make sure we are on-trend. We are not going to reinvent ourselves, but if we can be more relevant in 2019 than some of our competitors, then we can go in and educate customers about something they did not already know. We did this with cold brew a couple years ago when Starbucks and Dunkin Donuts came out with cold brew programs supported by huge advertising campaigns. A lot of our operators had heard of cold brew, but did not know what it is. We were able to approach customers with products and marketing materials and show them how to make more money by including this product category. We were able to bring our traditional customers something new.

Operating independent restaurants is a tough business. All the costs are going up – real estate costs, food costs, operating costs, wages – and they are operating on small margins. Anything we can do to help these customers raise their check average or bring more profitability is good. This includes better coffees, certified coffees, product innovations, etc.

In addition, social causes have become increasingly important to some consumers, and thus to companies like ours. We are currently promoting a particular coffee with a cause, sponsored by the International Women’s Coffee Alliance, which is sourced by and for the benefit of women in third world countries who are often impoverished or maybe not treated fairly. So, social causes are emerging as a market driver.

Tom Walzer: As traditional grocery is going through its transformation, some would jump to the conclusion that grocery is a dying or slowing industry because of all the new platforms available. I would argue just the opposite. Innovation is right in front of us, creating speed-to-market and the ability to interact with consumers in ways we never could before.

Baker Tilly Capital: With the growing change in consumer tastes and preferences, how are you approaching this at Saco Foods?

Tom Walzer: From a product perspective, we are always trying to reinvent ourselves toward current trends. Current trends include: sustainable, healthy and clean ingredients with simple branding and on-the-go snack foods. There are many unique opportunities with regard to product offerings and branding strategies to address these changes in consumer habits. The best example within Saco is the creation of Saco Conscious Baking where we focus on fair-trade practices, organic ingredients and simple packaging. We teamed up with Kiva to donate 10 percent of our profits to help people create better lives for themselves and transform communities worldwide.

Dimitri Pappas: First, it is really satisfying to make a tangible product people can enjoy. Many, if not most, professionals are involved in industries that sell intangible products. It’s a little old-fashioned, but it’s nice to be able to taste and touch and see the product and see the connection between what you make and the value it brings to the people who are consuming.

Second, the industry requires a balance of different skills. People’s tastes are constantly changing and the ways to get food to people are evolving so you need creativity to understand and capitalize on the unfilled niches. But there’s also a certain stability to the food industry – although there are longer-term trends that can fundamentally change your business model, from year to year major customers and suppliers stay relatively constant, so you need to be able to build long-term relationships, deliver on the commitments you have made and execute.

Baker Tilly Capital: Do you see the growing change in consumer tastes as a big opportunity that was not available in the not-too-distant past?

Dimitri Pappas: Yes. One of the things that is nice about the food industry is the number of different angles you can take. You could aim to be a volume leader and as a result become more efficient and have a cost advantage. You could aim to go after a specific product segment to take advantage of changing consumer tastes. There are angles in terms of the nutritional characteristics of a product or attributes like non-GMO or gluten-free. There are people who want to trace the corn in tortilla chips back to the farmer, and that is an angle that, 15 years ago, nobody cared about.

Download the full panel discussion

For more information on this topic, or to learn how Baker Tilly Capital specialists can help, contact our team.

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