April 7, 2017

Boulder, Colorado-based emerging brand accelerator, Sunrise Strategic Partners (Sunrise), has made a minority investment in Vital Farms, the largest producer of pasture-raised and ethically-produced eggs in the U.S.

This marks the seventh investment by Sunrise since its launch last year by Steve Hughes and Trilantic North America, and its fourth investment in grass-fed and humane animal operations. It also marks the second investment in Vital Farms in as many years, after the company secured $8 million in December 2015 from two unidentified private equity firms.

Founded in 2007 by Matthew O’Hayer, Vital Farms began with a flock of 20 hens and a business model focused on improving the lives of chickens by giving them full access to green pasture and the ability to forage for grass and insects. Reflecting its rapid growth, in 2012, Inc. magazine named the company as the fastest growing food company in the U.S.

“Vital Farms began pasture-raising eggs with a mission to bring ethical food to the table. We believe that raising healthy, happy birds outside on fresh pastures also produces the most nutritious and flavorful eggs,” said O’Hayer, Vital Farms founder and CEO.

Vital Farms sets the benchmark for the care and management of hens. Under its business model, its pasture-raised eggs are produced from hens that are each given 108 square feet of unrestricted outdoor space. This differs from cage-free production, which usually entails hens that are uncaged but kept in often overcrowded barns with no outdoor access; or free-range, which entails keeping hens in barns with limited access to the outdoors; or organic eggs, meaning that hens are kept in barns, are raised without antibiotics or hormones, are fed organic rations, but are kept in a free-range system with limited outdoor access, according to Food Navigator.

“As a result of Matt’s vision and perseverance, Vital Farms created the category of ‘pasture raised’ and has established the first-ever scalable and sustainable pastured farming model with over 100 independent family farms,” said Steve Hughes, Sunrise Strategic Partners co-founder and CEO. “As evidenced by our four investments in market leading grass-fed, pasture-raised companies, Sunrise is a big believer that this major trend is here to stay. We believe that once the consumer understands the difference pasture-raised eggs provides they will switch to Vital Farms and never look back.”

Vital Farms plans to use this investment to support the enrichment of the brand’s network of family farms, to invest in infrastructure, and to expand its market geography.

An Eggs-celent Investment

Because of its business mission, Vital Farms is ideally positioned to capitalize upon mounting consumer and regulatory demand to eliminate caged systems in the egg production industry. The shift in the market however, is also causing a disruption among traditional egg producers that could create opportunities for private equity.

Only last week it was announced that private equity investors including Archer Capital, CHAMP, Bain Capital, and Australia’s largest private equity firm Pacific Equity Partners, are lining up to bid for New Zealand-based Mainland Poultry, whose business includes Zeagold Foods, New Zealand’s largest egg producer, and MainFeeds.

Founded in 1997 and headquartered in Dunedin, Mainland provides New Zealand with one third of its eggs, including barn-laid, vegetarian, and organic eggs, as well as processed eggs, and chilled, frozen, and dried egg mixes through its Zeagold Foods unit.

However, new regulatory guidelines are calling for the complete elimination of battery cages in New Zealand egg production by 2022.

The company currently bridges both sides of egg production – controlling Woodlands, the country’s largest free-range farm, and its newest free-range operation at Waianakarua, but it also still has a sizeable caged operation, leaving prospective private equity bidders uncertain in how to approach, given the capex that will be needed to bring the company in line with regulatory changes.

Oh Yea! And Organic Snacks Too!

The first few months of this year have been busy ones for Sunrise. In January the firm announced its sixth investment – a minority investment in Pure Growth Organic – a maker and marketer of a line of organic snacks.

Pure Growth was founded by Chris Clarke and Sabrina Peterson in 2015 – the same year that organic sales topped $39.7 billion, according to the Organic Trade Association. Of these sales, organic snacks accounted for $2.3 billion. Furthermore, in April of last year, IRI forecasted that total U.S. snack sales were expected to grow by $35 billion in the coming five years.

“Millennials continue to choose organic snack alternatives over existing legacy offerings. Yet there are limited better-for-you snack products for 2 to 12 year olds, leaving millennial moms with a major vacuum to deal with once their children graduate from organic baby food. As an early mover in affordable organic snacks, Pure Growth is well positioned to participate in continued growth in this market,” said Sunrise Strategic Partner Co-Founder and CEO Steve Hughes.

The capital gained by Pure Growth will be used by the company to its distribution channels to include more retailers and grocers, expand its sales and marketing teams, and enhance supply chain management.

“We started Pure Growth to create organic, better-for-you snacks at an affordable price point. Kids and their moms love the iconic characters on our packaging which make our brand recognizable on shelf,” said Chris Clarke. “With Sunrise’s investment we are well positioned to take Pure Growth to the next level and expand the brand into additional channels and product offerings.”

-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.