Delivering the week’s top organic food news
7.27.2022
100% Non-GMO

Organic Brands Now Face a Very Different Financial Environment


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Thanks to the war in Ukraine war, unprecedented supply chain challenges, inflation and lingering effects of a global pandemic, operating an organic food business has never been more difficult.

Given these conditions, it should come as no surprise that the once ravenous and seemingly insatiable demand to invest in organic brands has reversed course in dramatic fashion.

One way to measure just how stunning this about-face has been is to analyze how Wall Street has valued publicly-traded, organic/natural food companies over the past few years.

In approximate terms, here is a look at the valuation multiples of Vital Farms, Laird Superfood and Zevia.

VITAL FARMS (VITL:NASDAQ)

October 2020 — 12.1x trailing revenue
July 2022 — 1.7x trailing revenue

 

LAIRD SUPERFOOD (LSF:NYSE American)

December 2020 — 20.6x trailing revenue
July 2022 — 0.5x trailing revenue

 

ZEVIA (ZVIA:NYSE)

September 2020 — 10.2x trailing revenue
July 2022 — 1.6x trailing revenue

For most organic brands, going public is neither realistic nor an aspiration, yet this analysis does give us one data point regarding the willingness of investors to own a piece of an organic food business.

But how do venture capitalists, who invest in private organic companies, view the current environment?

“Doing an equity raise is rough right now, and it is a harder time to get capital,” said Genevieve Gilbreath, co-founder and general partner at Springdale Ventures. “We are seeing a lot more bridge rounds (convertible notes) getting done because brands want to ensure that there is extra capital on hand in case of a downturn. However, most VCs are waiting until the end of Q3 to see what is happening in the market and for valuations to compress. And they are compressing. The ‘growth-at-all-costs’ approach has gone away, and tech investors are much less interested in CPG right now, which is also helping to normalize valuations.”

According to Ross Iverson, chief investment officer of Manna Tree, “It will be more challenging for firms without significant adoption levels to receive funding while they are burning cash. New business models, new ingredient types and new brands will struggle the most through this cycle. On the flip side, firms that are getting creative by partnering, merging or building platforms to scale may be more appealing to investors to gain the level efficiencies and correlating profits sooner. We have always been very selective in our approach, and out of the 1,100 deals we have reviewed in the past 48 months, we have invested in 12.”

One segment of the market that has been actively making investments in younger organic brands has been the CPG multinationals. But the manner in which they are approaching deals has changed with the market as well.

“Three to five years ago, the big strategics were sprinkling money around, but you are now seeing more focus from them,” said Jonathan Hodson-Walker, managing partner of Silverwood Partners, an investment banking firm that advises CPG brands. “The strategics are still making minority investments, but they are less interested in buying small brands that are experimental and can’t be $100M businesses. Supply chains and scale are very important to them right now.”

Manna Tree’s Ross Iverson shares this sentiment.

“From our experience, the larger CPG brands would like to see ‘turn-key’ operations versus absorbing into existing infrastructure due to the supply chain pressures. They are also wanting to see larger revenue levels to ensure consumer adoption of a product. I believe they will continue to look for compelling minority investments to ensure they have a seat at the table for acquisition.”

When that potential acquisition comes is a lot more unclear given the current market conditions, and brands need to be ready for what may lie ahead.

“There is a ton of uncertainty right now, and we are telling our portfolio companies to prepare for what might be a downturn. Pull back where you can but still drive growth, and have a very strong point of differentiation. If your supply chain is not really tight, you will get cut off from shelves. Target doesn’t want to deal with anyone who cannot fulfill orders,” put forth Genevieve Gilbreath.

With gratitude,

Max Goldberg, Founder

New Organic Products

New Organic Products

Crunchy Plantain Nuggets from Barnana

An expansion into a new snacking category, the Organic Crunchy Plantain Nuggets from Barnana have just hit shelves. They are made with green plantains, which are rich in resistant starch that has not yet converted to sugar, and come in four flavors -- pink salt, ranch, chili lime and BBQ. Winner of my Top 5 Organic Products at Expo West 2022.

Plant-Rich Kids Meals from Once Upon a Farm

Once Upon a Farm has introduced Organic Plant-Rich Kids Meals that come in four flavors -- pea, zucchini & basil; sweet potato, mango & coconut milk; sweet potato, raspberry & coconut butter; quinoa, banana, spinach & coconut butter. Unsweetened, gluten-free, vegan and Non-GMO, they can be served as purée, mashed or as finger food.

No Beef and No Chicken Broth Pods from Ocean's Halo

New from Ocean's Halo are organic, plant-based No Beef and No Chicken Broth Pods. Gluten-free and made with sustainable, ocean-farmed kelp, both products contain lower sodium than chicken and beef, respectively. Exclusively available at Whole Foods Market.

No Sugar Added Juice Boxes from Uncle Matt's Organic

Uncle Matt's Organic has announced the launch of No Sugar Added Juice Boxes for Kids. Available in two flavors -- lemonade and strawberry lemonade -- the shelf-stable line contains zero added sugars and is sweetened with stevia. It is boosted with 150% DV Vitamin C, 25% DV Vitamin D and zinc for immune support.
This Week's News Items

Weekly News Summaries

First Course
Mother Jones

Organic Farming is Not to Blame for Sri Lanka's Crisis

By Tom Philpott

An excellent analysis of the economic situation in Sri Lanka and what the media, including Tucker Carlson, fail to mention when blaming the country's financial problems on the switch to organic farming.

CCOF

Big Wins for Organic in California

By Rebekah Weber

Governor Gavin Newsom signed into law the 2022–2023 state budget that includes $5 million for grants, technical assistance, education and outreach to support farmers and ranchers to transition to organic. The program also sets aside funds for socially disadvantaged farmers and ranchers.

Center for Food Safety

Biden Administration Rejects Legal Petition to Phase Out Use of Toxic Agricultural Pesticides on National Wildlife Refuges

The U.S. Fish and Wildlife Service has denied requests by conservationists and members of Congress to phase out the use of agricultural pesticides on national wildlife refuges.

Second Course
Center for Food Safety

Legal Appeal of Organic Hydroponics Begins Today

The U.S. Ninth Circuit Court of Appeals will hear arguments challenging a district court ruling that authorized the USDA to continue certifying soil-less hydroponic operations as organic under the organic label. 

The Guardian

Weedkiller Ingredient Tied to Cancer Found in 80% of U.S. Urine Samples

By Carey Gillam

More than 80% of urine samples drawn from children and adults in a U.S. health study contained glyphosate, a chemical that is linked to cancer.

Food Safety News

Daily Harvest has Identified Tara Flour as Cause of Illnesses

By Jonan Pilet

CEO Rachel Drori says that the company has identified tara flour as the cause of the more than 470 illnesses reported to the company.

Third Course
The Cornucopia Institute

Cornucopia Unveils Interactive Organic Dairy Farm Map

This map includes regional and local brands rated 4 or 5 cows on Cornucopia's Organic Dairy Scorecard, as well as small certified organic dairies that meet its top-rated standards but only sell direct from the farm.

Wisconsin Public Radio

PETA is Suing Organic Valley for Separating Calves from their Mothers

By Hope Kirwan

An animal welfare researcher says the practice can protect calf health. But there's growing interest in the potential benefits of the cow and calf bond.

BusinessWire

Organic Basics Apparel Brand gets Acquired

Delta Galil Industries, the Israeli-based global manufacturer and marketer of branded and private label apparel products, has acquired the Organic Basics brand and certain assets.


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