June 7, 2017

Investing in oat-based food startups and companies is becoming a savvy strategic move for private equity. Not only are oats ranked seventh in global cereal production and span both the human food and animal feed markets, but they tick off multiple consumer demands, including being plant-based, gluten-free, heart-healthy, and a whole and ancient grain that is nutritious and filling. And private equity has taken notice.

One Week, Two Deals

Two private equity firms have announced deals for oat companies within a week’s time. Toronto-based Ironbridge Equity Partners announced its acquisition of Avena Foods.

With more than $400 million in assets under management, this will be the tenth investment from Ironbridge’s second fund, Ironbridge Equity Partners II, which is fully committed at $154 million, according to Private Capital Journal.

Founded in 2005, Avena Foods is the leading producer of certified organic, gluten-free oats through its Purity Protocol farm to table production model to the North American market. Produced from the company’s dedicated gluten-free facility, Avena’s oats are guaranteed to be wheat, barley, and rye-free.

“From our first meeting, we were very impressed with the business that the Avena team has built,” said Peter Samson, managing partner at Ironbridge. “They have an outstanding reputation in their market for consistent product purity, and we believe this gives them an excellent platform as they look to continue to grow in this dynamic industry.”

Ironbridge brings its long term investment philosophy to the table and will provide Avena Foods with strong financial backing as well as its experience in working with management teams to optimize opportunities for growth. Avena Foods plans to use the fresh capital to accelerate the company’s ability to reach its goals, while still providing oats that meet the industry benchmark of being below the 5 ppm gluten level which surpasses the standards set by the U.S. Department of Agriculture, the Gluten-Free Certification Organization, Gluten-Free Certification Program, and Health Canada.

Also this week, savory oat company Grainful announced it has raised $3.3 million in a round led by Advantage Capital, Rand Capital, and CircleUp.

As a pioneering disruptor in the category, Ithaca, New York-based Grainful’s goal is to show consumers that steel cut oats offer more versatility than just as a breakfast food – and can easily be a better-for-you replacement for other traditional starches such as pasta, rice, and potatoes in savory dishes. Based on this premise, Grainful produces lines of oat-based frozen entrees and meal kits that are high in fiber, gluten-free, and healthy, and which are sold in more than 2,000 stores including Wegmans and ShopRite locations.

“You see a lot more talk about using oats in non-traditional ways now and that exciting,” Jan Pajerski, Grainful president and co-founder told Food Navigator. “We’ve also been talking about private label opportunities with some larger CPGs interested in using oats in savory applications, so the concept is definitely becoming more prominent.”

Earlier this Spring

Earlier this year in March, Boulder Investment Group Reprise (BIGR) led an $8 million Series A for Boulder, Colorado-based nutritional oat bar maker Bobo’s.

Founded in 2003, Beryl Stafford and her daughter, nicknamed “Bobo”, began baking small-batch oat bars using basic ingredients. The natural nature of the product, and the small-batch baking process employed in its production has won the company a loyal following.

“Bobo’s represents an evolution of the bar category, marrying a fresh-baked, handmade product with convenient, whole-food nutrition; we believe that to be a powerful combination,” said Duane Primozich, managing partner, Boulder Investment Group Reprise.

With this backing, Bobo’s is aiming to position itself in the market to be a direct competitor with national giants in the category including Clif bars and KIND, and is targeting a new benchmark of exceeding $100 million in revenue.

-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.