Post Holdings leads $12.5m Series B round at PeaTos: ‘We believe it has a bright future’
Best-known for its iconic cereal brands from Grape Nuts to Raisin Bran, Post Holdings also owns the Michael Foods egg business, refrigerated retail brands Simply Potatoes and Crystal Farms, and nutrition brands Premier Protein, Powerbar, Joint Juice, Dymatize and Supreme Protein.
The investment in PeaTos - which grew 50% in 2020 vs 2019 - will help the CPG giant “gain an understanding of the fast-growing snacking space,” said Post Consumer Brands president and CEO Howard Friedman: “We are very excited to begin our partnership with [PeaTos CEO] Nick [Desai] and the PeaTos brand. We believe it has a bright future and we can learn a lot from their entrepreneurial culture.”
Collaboration opportunities
So is this just a capital injection or will there be opportunities to collaborate with Post?
It’s early days, said PeaTos CEO Nick Desai - who raised $7m in a Series A round last year - but there will be opportunities to work with Post “in other strategic capacities, we’re in the process of finalizing what that will be, but there will definitely be a strategic element to it.
“There could be opportunities in the supply chain side with the legume-based infrastructure that we’re developing,” added Desai, who said there could also be opportunities to increase distribution by leveraging Post’s relationships with retailers and distributors.
Acquisitions and in-house NPD
While there is an enormous amount of runway for the PeaTos brand – which is currently in around 4,700 stores from Kroger to Sam’s Club and has a growing e-commerce business at Peatos.com and Amazon – Desai is also exploring acquisitions in branded legume-based products, he fold FoodNavigator-USA.
“Beans and legumes are such versatile and underutilized ingredients and my parents having come from India, I have been exposed to the true power of legumes and what kinds of products can be created using them.
“We are very focused on legume-based products where we see massive growth, whether it’s pasta, cereal or snacks – we’d like to develop a portfolio of legume-based products and not necessarily just in snacks.”
However, PeaTos will continue to develop new products in-house, he added, with a new line of chips launching this year.
“We grew 50% in 2020 vs 2019 and while it’s still early, we’re on track to double this year vs 2020.”
Growth is coming in multiple channels, notably e-commerce, said Desai, who said the pandemic might also prompt brands to rethink spending on trade shows, having discovered new, more cost-effective ways to reach retail buyers. "Even some relatively small companies were spending six figures to go to Expo West and I don't think they are going to do that again in the near future; I think something is going to have to shift in that model."
While foodservice sales suffered in 2020, they are starting to come back, he said. "We're seeing a lot of success with QSRs like Smoothie King and convenience stores, plus some people are gearing up to go back to offices in Q3."
Made from pea and lentil flour, fava bean protein, pea fiber, high-oleic safflower oil, rice, and seasonings, PeaTos classic cheese crunchy curls have 4g protein [twice that of Cheetos], 3g fiber [three times that of Cheetos] and 130 calories [vs 160 for Cheetos] per serving with no synthetic colors, flavors or added MSG, coupled with less fat [8g vs 10g] and less sodium [200mg vs 250mg].
David vs Goliath: ‘Hey Chester, we did it better’
PeaTos - which removed its ‘Tigers live longer than cheetahs’ strapline after receiving a cease and desist letter from PepsiCo/Frito-Lay's lawyers in 2018 – took on Chester the Cheetah again last year with a series of “lighthearted” billboards and digital ads, and has been vocal about the challenges of competing with “the 800lb gorilla in the category.”
Speaking to FoodNavigator-USA last year about the ‘intentionally provocative’ ads, which featured straplines including, ‘Hey Chester, we did it better’ next to a snack shaped like a raised middle finger, Desai said: “There’s nothing illegal about taking on a competitor.
“If anything, these guys need more people going up against them. Think about it. Amazon has something like 40% share of the US e-commerce market and people are talking about breaking it up; Frito-Lay has something like a 65% share [of the US salty snacks category] and no one is talking about breaking up Frito-Lay.”
