Private label manufacturer of single serve powder beverages and instant oatmeal
Sturm Foods was a manufacturer of private label products including powdered drink mixes, single serve instant beverages, oatmeal, and other dry mix products that are sold to a variety of customers in the grocery, mass, convenience and foodservice channels. Its products are on trend with customers seeking healthier lifestyles, which are sold at a compelling value to branded alternatives.
The Value Creation Opportunity
Through our focus on private label as an attractive category for retailers looking to promote their own identities and consumers desiring high quality products at value price points, the Kainos team was introduced to Sturm Foods. Sturm Foods represented an opportunity to acquire the private label market leader in the growing sugar free drink mix and instant hot cereal categories. Sturm’s products focused on healthy alternatives for consumers concerned with obesity, diabetes, and heart disease as well as consumers’ desire for convenience. At the time of our investment, Sturm Foods was primarily focused on private label oatmeal and other dry mix products with a growing business in sugar free drink mix. We saw an opportunity to drive significant growth in revenue through product innovation. Sturm Foods’ sugar free drink mix business, which was principally packaged in the multi-serve format, had just introduced single serve “stix” packaging that could turn any bottle of water into a functional beverage. We believed that Sturm was on the early part of the growth curve in single serve drink mixes and through continued innovation in flavors and product types could significantly increase household penetration and create a private label food business of scale. In 2005, the Sturm Foods’ management team partnered with the Kainos team due to their understanding of the category, relationships with key retailers, and desire to move quickly to invest in new equipment and capacity to capitalize on this opportunity.
Change Capital At Work
Immediately after partnering with the Sturm Foods management team, we invested over $70 million in expanding the manufacturing facility and acquiring new equipment to capitalize on the growth opportunity in private label hot cereal and sugar free drink mix. Leveraging the new manufacturing capabilities, we expanded the Company’s core product categories to include more valued-added and functional items such as organic and heart healthy oatmeal, and sugar-free drink mixes with energy, isotonic and vitamin enhanced properties, placing Sturm in the attractive first-mover position in these powdered sugar free beverage product categories.
Together with the management team, we implemented lean manufacturing practices and a new ERP system which resulted in significant inventory and cost reduction. We also acquired the premium McCann’s Irish Oatmeal brand to complement the Company’s core private label hot cereal offerings.
The Kainos Effect
In 2010, after tripling the profitability of the Company, Sturm Foods was sold to Treehouse Foods (NYSE: THS).Back