Pritzker Private Capital is a US-based private-equity investor that counts C.H. Guenther & Son, Monogram Foods Sugar Foods among the companies in its portfolio.
Chris Trick is one of Pritzker Private Capital’s investment partners and leads the firm’s Manufactured Products arm, which covers the investor’s presence in food and beverage.
Just Food sat down with Trick to discuss Pritzker Private Capital’s investment strategy and the overall M&A landscape in the US.
Dean Best (DB): You’ve been at Pritzker Private Capital for just over a decade. Thinking about how private equity invests in food, what’s changed?
Chris Trick (CT): I wouldn’t say this is specific to what we do here at PPC but, if you look over just the course of time and private equity, largely returns were driven by financial engineering. That’s not to say that isn’t still a part of using leverage and driving returns but having real expertise in the sector, so you can find the right opportunities, and having resources, whether that’s operational efficiencies or best practices, commercial introductions. We have to show up to the table with something more than just capital. That’s more true than it’s ever been in our industry and that’s not going to change anytime soon, just given the amount of interest in middle-market investing, the amount of dry powder that’s out there. That’s probably the biggest change just from a macro perspective.
DB: What types of companies interest you?
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By GlobalDataCT: Zooming out from food and beverages holistically, we’re a family business and we have a deep family heritage. We like to partner with family or founder-owned businesses, or what we say are management teams with significant influence. We’re looking for true partnerships: a dedicated team, the family legacies are also often really important to us. We think it just kind of drives a different style within the company, a different culture.
With that, innovation is something that you’ll see common throughout all of our companies, whether that’s private label, co-manufacturing or branded. Our view is having a real focus, real investment, behind innovation is what’s going to keep you at the forefront and relevant to your customers whatever channel you’re in.
We don’t play fads. We don’t play commodity products. We really focus on companies that have a deep history of innovating for their customers regardless of what channel they’re in. Obviously, defensible market positions, favourable growth trends, those kind of table stakes items.
DB: What level of net sales does a food company have to already be generating?
CT: It depends on margin profile. We typically say $20m of EBITDA and up is where we start to get excited. That’s not to say there’s not a lot of great companies that are smaller than that. One of our firm beliefs in food generally is scale matters in manufacturing and so $20m and up from an EBITDA perspective is really where we start to lean in on opportunities.
DB: Is the strategy focused on North America?
CT: North America-headquartered businesses. That goes back to my partnership point. How can we be true partners to a business? Our view is we’ve got to be within a relatively reasonable plane flight away to be true partners. That being said, especially on our broader manufacturing businesses, we have significant European exposure. CH Guenther, our global bakery business, is a big player in western Europe and then obviously Asia and Central-South America.
DB: How many deals has Pritzker Private Capital done this calendar year?
CT: From an add-on standpoint in our food and beverage businesses, we will do two by the end of the year: one here actually in North America, one in Europe that will probably close in Q1 but it’ll be announced here soon that we’re really excited about. We’re not a high volume firm. We’re not making a lot of platform investments a year. A lot of our businesses we know for multiple years before we have an opportunity to partner. As a firm, we’re probably doing two to three new platform investments a year and then add on with the ebb and flow with the market of what makes sense for the businesses. This year, in total, our firm will do probably close to 15 add-on acquisitions across all of our companies.
DB: How do you view the overall M&A environment in 2024?
CT: It’s definitely accelerated from ‘23. Within food and beverage there’s obviously been a couple of large transactions, Mars/Kellanova being the one that is front and centre for everybody. I think there’s been a lot of activity smaller than where we typically target. That market seems to have been functioning better with a lot of capital going into kind of early, growth-stage, more venture-type, food businesses. The fat part of the curve for us – I say $20m in EBITDA and up; most of our businesses are probably $50-100m to start of EBITDA – that market has not been as active in the food and beverage space. It feels like it’s picking up, just given the conversations we’re having and where we focus our time. Our expectation, based on conversations with bankers and other industry participants, is that ‘25 should be more robust than this year. It feels like we’re on that glide path to getting back to more normalcy, if you will.
DB: In that part of the curve that you spoke about, why do you think it’s not been as active? Related to that, what’s driving your feeling that activity could start picking up?
CT: From our focus area, just the size wise, I think it’s been a little slower because, look, if you don’t have to sell a business right now, it’s probably not the ideal time for a lot of people. One is food’s a very resilient industry and obviously one of the reasons we like it. True volume growth has been tough for a lot of food companies this year and so, if you got people traipsing through your financials and you’re just kind of steady as you go, that’s a little less exciting for people to be selling their businesses.
And then obviously, in our marketplace, the cost of debt’s gone up significantly in the last three years. That’s put some pressure on cash flow and the values that people can pay for these assets. Obviously, the Fed here has signalled that rates will continue to come down. We can all debate where they’re going to come down to but I think psychologically that’s helpful for a lot of people to see that. The last thing I’d say is it does feel like food volumes have stabilised. People have found that new normal. We’re seeing it across our businesses that true volume growth is there. If that continues for another, six, 12 months, I just feel like people will be in a very different conversation when they go to sell their business than they were for the vast majority of ‘24 and really all of ‘23.
DB: Private label is one of the firm’s focus areas, isn’t it.
CT: That’s really been one of our key focus areas, within food since we started our efforts back in 2014. If you look at private-label trends, they’re obviously taking share when there’s a constrained consumer. We’ve been betting on that even before the constrained consumer because we just look at private-label exposure in Europe versus North America,. We’re still significantly behind. The quality of private-label products have also really increased over the last decade. You can capitalise on a period of time when people switch to private label because of their own financial situation. I think people are really realising that you can get national-brand-equivalent products without the marketing spend at a lower price point and still be satisfied. You see folks like Amazon and Walmart doubling down in private label and coming out with new price levels but more premium products and I think that’s a trend that we’re going to see here stick in North America for a long time.
DB: As national brands try to get their volumes growing, there could be stiffer competition for private label. Could that mark an entry point for you with some private-label suppliers thinking maybe now is time to get fresh investment or a new owner?
CT: Yes, the brands aren’t going to just sit around and watch their shelf space deteriorate. We are seeing some more discounting from national brands that hadn’t been discounting for a while. That’ll draw some people away but, if you see private-label market share gains, they’ve been pretty consistent quarter over quarter here in North America for a while now. We’re hopeful that some private-label folks will say ‘Well, this has been a great run. We’re now at capacity. We’re a family owned business and the next investment’s a new $50m facility.’ Those are always more work and cost more than you expect when you launch a new facility. We do think that’ll drive some opportunities for us but I go back to it: we’re very bullish on private label despite what the brands may react to.
DB: Drilling down further, are there other categories or product trends that interest Pritzker Private Capital?
CT: If you look at our current group of companies, we’re deep in bakery with CH Guenther. We’ve been partners with that business for over six years now and we still think there’s a lot of opportunity there, so we’re going to continue to invest behind that business. Our business Sugar Foods that we invested in just a little over a year ago makes beverage toppings and food toppings, croutons, a whole host of products. It’s a phenomenal business that no one’s really ever heard of. There are tangential products that we’ll continue to invest in to round out that product offering. These are really anything that can go on a sandwich or into a salad or into a drink.
We’ve spent a lot of time looking around pet food. That’s another area of focus. Sauces, if you think about condiments, I think there’s a lot of trends behind that, especially if you think about ethnic food growth here in North America.
DB: Bakery’s has been a particularly active segment in North America. Is that something you expect to continue?
CT: Yeah, I think so. We’ve been partners with the business for over six years now. There is a long, long list of one-facility operations, very niche products. I go back to the point that I think scale matters and, over time, our company’s customer relationships can really drive some great cross-selling opportunities. Then you get the benefit of scale, which obviously plays into commodity purchases and everything else. There’s hundreds of small bakeries still here in North America, and our aperture is really North America and Europe. There’s no shortage of phone calls we’re making trying to continue to build out CHG’s presence.
DB: Would ethnic food be a brand new area for Pritzker Private Capital?
CT: We have ethnic exposure through CHG and Sugar today. When you think about a full platform approach, businesses could fit with either those two depending on the product set, or it could be a full new platform with a dedicated strategy.
CHG did an acquisition last year to get into the tortilla space, just obviously [with the] changing demographics in the US and we’ve seen massive growth. We’ve already put in significant capex to continue to scale that business.
DB: The pet-food category continues to grow and present opportunities for more M&A even after the spike in demand seen during the Covid-19 pandemic.
CT: Candidly, we’ve treaded lightly there. I think that marketplace got overheated for a while for sure. We have significant pet food exposure with our packaging business. It’s a marketplace that we track closely. It’s not one that we’re going to go into blindly because prices got overheated. That being said, pet ownership might slow down but people that have pets I think we’ll continue to treat them like family members. We’ve looked at a lot of opportunities in the space, haven’t found the right one yet but hopefully in the future that changes.
