North American packaged food giant, ConAgra Foods, announced that it has agreed to acquire the specialty packaged food business of Frontera Foods and Red Food LLC, including the Frontera, Red Fork, and Salpica brands for an undisclosed amount.
Frontera, which makes premium Mexican food products including salsa, sauces, and meals, and Red Fork, which produces premium American cooking sauces, will join ConAgra’s portfolio of brands that includes Marie Callender’s®, Healthy Choice®, Slim Jim®, Hebrew National®, Orville Redenbacher’s®, Peter Pan®, Reddi-wip®, PAM®, Snack Pack®, Banquet®, Egg Beaters®, Hunt’s® among others.
“We are excited to add the Frontera, Red Fork and Salpica brands to our portfolio,” said Sean Connolly, president and CEO of ConAgra Foods. “In particular, the Frontera brand is a preeminent gourmet Mexican food brand in North America. We believe it provides a tremendous platform off which we can build.”
This acquisition is the first deal for ConAgra since the group moved its headquarters to Chicago in June of this year, and reflects a strategy shift adopted by the company ever since Connolly assumed the role of CEO last year.
“It is our strategy to reshape our ConAgra portfolio to be more premium and more contemporary,” Connolly told The Herald. “It’s a terrific fit with our existing portfolio.”
Under the terms of the deal, Frontera founders, celebrity chef Rick Bayless and former Kraft Foods executive Manny Valdes, will remain connected with the business in an advisory capacity, while Albert Valdes, Fontera’s current CEO, will stay on the lead the business under ConAgra.
Although Frontera has realized double-digit annual sales growth since its founding in 1996, the company faced challenges in keeping pace with demand as its brands reached a national scale.
“We were faced with a situation where we were only meeting about 60 to 80 percent of our demand,” Valdes told The Herald. “We came to the conclusion that we needed to make some significant investments in manufacturing.”
“We are looking to ConAgra to help us get really good food into more homes across the United States in a way that we just don’t have the capability to do it,” added Bayless.
Not Alone
ConAgra is not the only North American food giant expanding their ethnic food segments as a way of remaining competitive. US Foods announced it has agreed to acquire Italian specialty food distributor, Jeraci Foods, for an undisclosed amount.
Launched in 1972 in Elmsford, New York, Jeracri Foods is a family owned business that distributes a complete line of domestic and imported authentic Italian foods throughout the New York metro region with $26 million in yearly sales.
“As a family owned business Jeraci Foods has built a strong reputation for great customer service and high quality food,” said Chuck Gannon, area president, US Foods. “At US Foods, we pride ourselves on those same characteristics and look forward to bringing an even more robust product offering to Jeraci customers.”
After the deal closes on October 7, Jeraci Foods is planning to shift its operations to the US Foods location in Perth Amboy, New Jersey.
A Segment Worth Exploring
Sales of ethnic foods in the U.S. reached $11 billion in 2013 and are on pace to reach a value of $12.5 billion by 2018, according to Statista. The bulk of these sales are being generated from Mexican food sales which total $1.6 billion followed by Asian foods.
Food Processing reports that 88 percent of Americans eat at least one ethnic food per month, while 17 percent eat ethnic food at least seven or more times per month. In addition, almost one-third of all U.S. consumers have eaten an ethnic food that was new to them over the past year, according to data from the National Restaurant Association.
U.S. consumers are becoming more open to a wider range of flavors and cuisines, particularly to Asian flavors that balance spicy, salty and sweet flavors. But numbers are behind the growth in sales of Mexican flavors and foods.
By 2060, the U.S. Hispanic population is expected to more than double from 55 million to 119 million according to U.S. Census Bureau data – and with a current market share of 62 percent of the ethnic food market, Mexican foods are poised to dominate growth in the sector.
“And with the relationship between Cuba and the U.S. improving, consumers should see flavors from Havana, like green olive, guava, dark rum and sofrito,” Kelli Heinz, director of marketing and industry affairs at Bell Flavors & Fragrances Inc. told Food Processing. “Global street food from Latin America, Mexico, Marrakech, Ho Chi Minh City and others will also come into light.”
And these trends are certainly not lost on investors active in the industry. “…consumers’ appetite for specialty and ethnic foods continues to grow,” said Brian P. O’Connor, managing director of Vestar Capital Partners. “Demographic trends also support a bright outlook for specialty foods. Specialty foods are on trend in a big way.”
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Lynda Kiernan