Charlesbank Capital Partners and Partners Group have collectively agreed to acquire Hearthside Food Solutions, the largest independent bakery in the U.S., from Goldman Sachs and Vestar Capital for $2.4 billion.
Founded in 2009 in Downers Grove, Illinois, by Wind Point Partners and former ConAgra Foods and Ralcorp executive Rich Scalise, Hearthside was acquired by Goldman Sachs and Vestar Capital in 2014 for $1.1 billion.
Hearthside is the largest and fastest growing independent baker and full-service contract manufacturer of grain-based food and snacks in the U.S.. Its product lines include cookies, pretzels, crackers, nutrition bars, and snack bars, which it provides to global food and beverage companies including Kellogg Co. and Pepsi. The products are manufactured through its network of 25 facilities across the U.S. and Europe. Over the four years the company was owned by Goldman Sachs and Vestar, Hearthside successfully closed four acquisitions, expanded into new food categories, and pursued an expansion into Europe.
“Our relationship with Goldman Sachs and Vestar was exceptional,” said Rich Scalise, founder, chairman, and CEO of Hearthside. “Their partnership enabled growth, strategic direction and most importantly trust. We are excited about taking those enablers to the next level with Partners Group and Charlesbank as we look to new geographical markets, new categories to enter, and in continuing to make our customers first in everything we do.”
Charlesbank and Partners Group state that they plan to work closely with the Hearthside management team led by Scalise on a number of initiatives designed to prompt organic growth including the expansion of the company’s product lines, the pursuit of add-on acquisitions that will give the company access to new geographies and a foothold in adjacent industries, and the enhancement of existing production processes.
“Under Rich Scalise’s leadership, Hearthside has revolutionized food contract manufacturing, bringing scale to the industry. We see strong potential for the company to continue on its growth path as its business model is supported by global transformative trends, such as increased outsourcing, which show no signs of flagging,” said Chris Russell, managing director, private equity Americas, Partners Group.
Setting the Bar
Demographic shifts toward older populations, greater concern by consumers about health and the functionality of food, and lifestyle changes driving demand for more convenience, the dietary fiber market is expected to see a compounded annual growth rate (CAGR) of 13 percent by 2020, according to Technavio.
One of the main drivers behind this impressive CAGR is the growing popularity of bakery products that contain fiber and whole grains. Advances in food technologies have now made it possible to replace many of the fats used in the production of these products with healthier dietary fibers without losing the ability to maintain freshness, quality, and taste.
A second driver of growth for the category are cereal bars, cites Technavio. As consumers seek out foods that help in weight management and appetite suppression, while also offering functional ingredients such as Omega-3s, vitamins, and minerals, cereal bars’ convenience has made them a go-to choice.
Amid these shifts, Hearthside is ideally positioned to leverage its standing in the market to realize future growth.
“Hearthside has been an exceptional food platform that we identified early and were successful in helping to scale into Europe and across high-growth categories,” said Nicole Agnew of Goldman Sachs. “The company has experienced tremendous growth under Rich Scalise’s leadership and we wish the company continued success.”
-Lynda Kiernan