April 10, 2017

Palladium Equity Partners announced a significant investment by one of its affiliated private equity funds in Kar Nut Products Company (Kar’s) – producer of the top branded trail mix in the U.S.

Terms for the deal were not disclosed, however, Crain’s Detroit Business reports that New York-based Palladium acquired a majority stake in the Madison-Heights, Michigan-based snack company.

Founded in 1933 by Nick Nicolay, Kar’s produces a wide range of value-focused trail mixes and nuts along with a portfolio of premium, all-natural snack mixes sold under the Second Nature brand name.

“We believe that Kar’s has established itself as the U.S. trail mix market leader, having grown two well-known brands that offer a range of value-based and premium products to meet the demands of consumers for convenient and nutritious foods,” said Yue Bonnet, principal with Palladium. “We are pleased to partner with Nick and the Kar’s leadership team with the goal of supporting the company’s continued strong growth in the healthy snack category.”

Snacking is Strong

Over the past number of years snacking has demonstrated continued growth as a consumer trend. However, this growth has recently accelerated with 76 percent of consumers snacking in 2014 increasing to 83 percent of consumers in 2016, according to Technomic.

“With consumers’ lives getting busier, snacks are serving more needs than in the past,” explains Kelly Weikel, director of consumer insights at Technomic. “To gain share, operators and suppliers must adapt their snack lineup to meet consumers’ wide range of need states—from tiding them over to the next meal to replacing meals, to providing nutritious, supplemental treats.”

Consequently, consumers are more often opting for snack foods as health plays a greater role in food choices, and younger consumers blur the lines between snacking and formal meals, reports Food Dive.

Today, 24 percent of all snack foods are eaten during meal times, according to a report issued by The NPD Group, compared to 21 percent five years ago – a trend that is expected to continue, with expectations that the trend will increase by another 12 percent.

Within this consumption dynamic, trail mixes and nuts also tap into the rise in demand for plant-based protein sources. Alternative protein sources have been increasingly on the radar of both consumers and investors. Global protein consumption is expected to climb at a CAGR of 1.7 percent, reaching 943 million tons by 2054, according to Lux Research. Over this same time period, alternative plant-based protein sources are forecast to command up to a third of the protein market as they fill the void created by slowing growth in meat and seafood production.

These shifts in consumer sentiment and in the market are driving larger companies to reconfigure their portfolios to include smaller CPG companies and startups that closely identify with these trends.

Just weeks ago, Conagra Brands announced it had agreed to acquire Thanasi Foods, a protein-based snack manufacturer and maker of Duke’s® meat snacks and BIGS Seeds for an undisclosed amount, and in late 2015, Texas-based Satori Capital acquired a majority stake in Phoenix, Arizona-based branded and private label nut and dried fruit producer SunTree Holdings for an undisclosed amount.

Palladium’s Play

Founded in 1997, Palladium has approximately $2 billion in assets under management, and has made $1.8 billion of investments across 32 platform investments and more than 100 add-on acquisitions. Underlying this success is the ability of the firm to be ahead of consumption trend curves, including snacking.

Kar’s joins a portfolio that already includes Sahale’s Snacks, a maker of premium, branded nut and fruit snacks; Wise Foods, a maker of salty snacks; Del Real Foods, a maker of refrigerated Hispanic foods; and Teasdale Foods, a maker of bean and hominy products.

“The markets served by our company are complex and continue to evolve, said Kar’s President Nicolay, who will continue in his position of president of Kar’s.

“Kar’s believes passionately that this partnership will better position the organization to drive innovation, meet customer needs, and most of all guarantee that our consumers will be able to find their favorite Kar’s Nuts and Second Nature trail mix snacks wherever and whenever they want them. Our partnership with Palladium, with their deep experience in partnering with founder and family owned companies at important inflection points in their growth, will allow us to continue fulfilling this mission and maintain our core values as we accelerate our efforts to reach more consumers.”

-Lynda Kiernan

Lynda Kiernan is Editor with GAI Media and daily contributor to GAI News. If you would like to submit a contribution for consideration please contact Ms. Kiernan at lkiernan@globalaginvesting.com.