Organic packaged salad, fresh fruit, and vegetables
Headquartered in San Juan Batista, California, Earthbound Farm is an organic food company offering organic packaged salad, fresh fruit and vegetables, as well as dried and frozen organic fruits and veggies. Drew and Myra Goodman founded the company in 1984 with the belief that growing wholesome food, in harmony with nature, is the better and more delicious choice. In the mid-80’s, Earthbound became the first company to successfully launch prewashed, packaged salad for retail sale. Thanks to continued innovation—including a new machine to precisely harvest delicate baby greens, a process previously done by hand—Earthbound Farm became one of the largest growers of organic produce in the country. Over the years, Earthbound has added a host of other organic fruits, vegetables, and innovative fresh and frozen offerings to its product line-up, and has led the industry in social responsibility and environmentally sustainable practices with the mission of making organic foods available to all. Earthbound sells its products to retail grocers, natural food retailers, club stores, mass merchants, and food service distributors across the nation.
The Value Creation Opportunity
The Kainos team developed an investment thesis targeting the perimeter of the store, where grocery retailers were increasingly focused on providing on-trend, convenient products and a differentiated shopping experience to their customers. The Kainos team also recognized a growing demand for convenient and healthy fresh foods, particularly evident in the organic packaged salad category which had consistently exhibited strong growth and outpaced the growth of the conventional (non-organic) salad category. In developing this thesis, the Kainos team formed a relationship with the Goodmans and the Earthbound management team as part of a broader investigation of the value-added produce sector. Earthbound selected the Kainos team as their partner of choice due to the strong relationship formed over the years, and Kainos’ sector knowledge of the value-added produce category and strong retailer relationships. The Kainos and Earthbound teams shared a vision to drive the evolution of the business from a “leading organic produce business” to a “leading organic food platform.” Despite the challenging economic conditions in 2009 when our partnership with Earthbound began, the Kainos team saw an opportunity to leverage a strong pioneer brand in organic food with over 25 years in the market in an attractive, on-trend product category.
Change Capital at Work
At the onset of the partnership, the Kainos team helped Earthbound establish a new headquarters in Palo Alto, California, a strategic location that enabled Earthbound to recruit strong senior talent, including a new Chief Customer Officer, Chief Marketing Officer, Chief Human Resource Officer, as well as supply chain, product development, and product sourcing executives. Kainos also made strategic investments in Earthbound’s operations to vertically integrate various elements of its supply chain, particularly vertically integrating into growing its own organic leafy greens versus solely relying on third party growers. Moreover, we also brought in-house the production of the recycle plastic clamshell packaging. We also invested substantial capital in the production facilities, adding additional capacity and automation, and new equipment sets for new product lines. Kainos also helped facilitate the expansion of Earthbound’s global fruit sourcing program, which was critical to the success of future new product innovation.
During our partnership with Earthbound, the Company experienced substantial growth in organic packaged salad driven by new product initiatives. Additionally, the Kainos team worked alongside the R&D team and developed and launched new value-added food items, such as frozen fruit products, snack mixes, and purees, many of which were facilitated by the Kainos-led expansion of the global fruit sourcing program. Earthbound successfully grew beyond the produce aisle of the store, launching a full line of 14 organic frozen fruits and vegetables.
The Kainos Effect
Earthbound and Kainos fulfilled our shared vision of creating a scale organic food company that stayed true to its heritage, continued to innovate, and fulfilled the mission of the founders of bringing the benefits of organic food to more people. The successful transition of Earthbound from a regional organic produce company to a leading organic food company and the largest non-dairy organic brand in the country attracted strong strategic interest. Ultimately, Earthbound was acquired in January 2014 by WhiteWave Foods, a leading consumer packaged food and beverage company focused on plant based nutrition.Back