Deal Snapshot: Stonewall Kitchen

Harris Williams recently advised Stonewall Kitchen, a portfolio company of Audax Private Equity, on its sale to TA Associates. Here, senior bankers from the Harris Williams Consumer Group share what’s attractive to investors about platforms like Stonewall Kitchen, how Stonewall Kitchen built its family of brands across multiple categories, and which key success factors are essential to replicating Stonewall’s success.

Why is a cohesive family of brands attractive to buyers and investors?
 

Freeman: A family of brands allows a company to leverage the collective scale of the broader organization against each of its smaller individual brands. It can behave like a larger company, enjoying sophisticated capabilities and a robust sales force. Yet it still has growing, nimble, on-trend brands.

For example, when working with retailers, multi-brand platforms can enjoy greater stature and efficiency. They can leverage their relationships and strength in each channel to disproportionately grow the brands that may not be as well represented at individual retailers or chains. There are also operational synergies. For instance, add-on acquisitions can be efficiently integrated into the existing infrastructure.

Alexander: It’s a compelling investment opportunity for investors. A family of brands offers a buyer the ability to take advantage of the platform’s organic growth while knowing there’s a proven M&A lever it can pull to drive even greater scale and growth. The platform can develop a robust pipeline of potential targets to acquire and fold into its portfolio.

How has Stonewall Kitchens been successful in building a family-of-brands platform?
 

Warczak: Stonewall built a sophisticated infrastructure that is comparable to a big consumer packaged goods company. The order-to-invoice cycle is consolidated, as is the physical distribution infrastructure. This enables Stonewall to provide big-company capabilities for specialty brands that sometimes struggle to scale because of what it takes to service large retailers. Stonewall Kitchen’s integrated infrastructure, which it continues to advance, drove a lot of investor interest. 

King: For its retail customers, the supply chain is greatly simplified. The retailer gets the benefit of stocking multiple on-trend, authentic brands that its consumers want, but they are ordered through one supplier and delivered together. It's also helpful from a consumer standpoint, particularly in the direct-to-consumer channel. The consumer can shop across different brands and product categories on one website and have them shipped together.

McPhilliamy: It’s more than just convenience: Stonewall Kitchen’s portfolio is a cohesive set of brands from a consumer standpoint. The company’s acquisitions have not been only about going into higher-growth, higher-margin areas. Stonewall Kitchen takes a consumer-led approach to acquisitions. The move into home fragrance and personal care, for example, is an extension of what Stonewall Kitchen consumers want. The products all work together and target one set of demographic characteristics.

Freeman: Consumers also have a high level of trust in the Stonewall Kitchen brand. The company has leveraged this trust creatively within its brand architecture, bringing Stonewall Kitchen into the names of the companies it acquires where it makes sense, such as “Tillen Farms, by Stonewall Kitchen.” The Stonewall Kitchen brand equity benefits the brands the company brings in, and it helps to convey the idea of a family of brands to the consumer. This brand cohesiveness is reinforced well in the company’s social media and marketing as well. For instance, Stonewall Kitchen will frequently showcase themed collections such as a breakfast basket that profiles a mix of brands.

What key success factors can be gleaned from Stonewall Kitchen that are applicable to other food and beverage and personal care/beauty platforms working to build a family of brands?
 

McPhilliamy: Typically, there is a hero brand in the portfolio that has strong equity and brings growth momentum or exposure to an attractive end market, but the other brands are much smaller and less desirable. Stonewall Kitchen started as a singular brand that expanded from farm stands to national distribution then embarked on a selective acquisition strategy to add brands with a similar ethos and positioning. What sets Stonewall apart is the strength of its entire brand portfolio and how its platform can deliver. It takes both to have a successful outcome.

Warczak: Many investors take more of a financial engineering approach to platform building. They buy brands and aggregate revenues and profitability but don’t fully drive synergies across an integrated platform, which is what Stonewall Kitchen has done. Some create shared distribution and services, but let individual brands continue to own the customer-facing aspects of the business. Being intentional about how the acquired brands work together from a consumer standpoint is critical to building a synergistic platform around a cohesive set of brands.

Freeman: Having a portfolio of products and brands with similar characteristics offers greater opportunity to create synergies. The brands Stonewall Kitchen has acquired are shelf-stable, premium-priced, specialty product lines. They can be shipped together on a single order. They often share a retail buyer. Without this cohesion, it can be more challenging to drive material distribution synergies.

Alexander: A robust M&A platform starts with a very healthy business that is growing organically at high single to low double digits. Then there’s the opportunity to layer on acquisitions. So, having a strong and growing core brand is fundamental to being able to have this type of platform. With a healthy business and strong brand in place, investors can then tap into the growth potential of small brands by giving them the large company infrastructure to rise to their fullest potential.

To learn more, please contact our senior bankers.

The Harris Williams Consumer Group consists of four major verticals – Food & Beverage; Restaurants & Retail; Branded & Private Label Consumer Products; and Consumer Services—and brings a wealth of expertise and end-market experience to each assignment.

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