March 4, 2019

Boulder Food Group (BFG) announced it has closed its second fund, BFG II, oversubscribed at more than $100 million without employing a placement agent.

Founded by Tom Spier (co-founder of EVOL)  in 2014 in Boulder, Colorado, BFG is a food and beverage-focused venture focused on backing disruptive, better-for-you, innovative, and socially-conscious food beverage and supplement brands.

Through its $50 million BFG I, the firm has an impressive track record, and holds some of the most forward better-for-you startups in their portfolio, including Good Day Chocolate, Malk Organics, Birch Benders, and OHI Superfood Bars. Indeed, after a holding period of only two years, BFG I divested Chameleon Cold Brew to Nestlé, a move reflecting success in identifying high-growth potential.

Combined, the BFG team has more than 30 years experience in the food industry. Spier himself has launched, grown, and sold food startups, while, managing partner Dayton Miller – who operates an office in Los Angeles giving the firm a foothold in two of the top food hubs in the U.S. –successfully sold his company Function Drinks to Sunsweet in 2015.

The firm states that it is this deep industry knowledge, combined with the firm’s track record, and its strategy to provide hands-on support to its portfolio brands is what sets it apart from its rivals.

“Fund II will give us the opportunity to invest deeper in a set of brands while staying focused on innovative early-stage food and beverage companies,” said Spier. “We’re exploring investments in a variety of categories with compelling value propositions for today’s changing consumer landscape.”

All For Function

The first investment made by BFG II will be in OLIPOP, the first clinically-backed digestive health beverage that benefits the microbiome, digestive function, and metabolic health as flavored tonics.

“We feel that OLIPOP is well-positioned at the intersection of great taste and true functionality, with nothing like it on the market”, said Miller.

Has BFG hit upon another high-growth opportunity?

With a CAGR of 6.1 percent, the global functional beverage market is expected to be valued at US$93.68 billion this year, according to data from Grand View Research Inc.

As health awareness plays a more forward role in consumers’ choices, function drinks are on a growth track, particularly in the U.S., UK , and Chinese markets. Investors and major CPG companies alike have been taking note, and are committing capital to gain a presence in the category.

In May of last year, CAVU Venture Partners led a $20 million funding round for REBBL, a maker of organic and functional coconut milk-based, super-herb beverages.

At the time, REBBL had posted triple-digit growth since its launch, which attracted not only CAVU – the backer of powerhouse brands including BAI Brands, Health-Ade Kombucha, and Bulletproof Coffee – but BIGR Ventures, and PowerPlant Ventures.

One month later, General Mills’ venture unit, 301 INC  led a $12 million round of funding for NextFoods, the parent company of functional probiotic beverage maker GoodBelly.

The potential growth represented in functional beverages also attracted global giants in the beverage category, such as PepsiCo.

Not only have health conscious consumers been turning away from soft drinks, but several cities across the U.S., including Chicago and San Francisco, voted to approve taxes on high-sugar beverages as a means to mitigate health issued linked to their consumption.

In response, soft drink giants have been investing in functional, bolt-on acquisitions that offer diversification into the health and wellness aisle, while also providing a hedge against new tax laws and catering to changing consumer tastes.

This landscape led PepsiCo in December 2016 to announce a definitive agreement to acquire KeVita – a leading North American maker of fermented probiotic and kombucha beverages – for an undisclosed amount, though  Fortune reported at the time that the deal was in the neighborhood of $200 million.

-Lynda Kiernan