Commentary

Campbell Reportedly Near Distress Sale Of Bolthouse Farms To Ex-CEO

Campbell Soup is close to closing a deal for its Bolthouse Farms fresh foods business with a group led by its former CEO, Jeffrey Dunn, who also served as president of Campbell Fresh from 2015 to 2016.

Campbell paid $1.55 billion for the company in 2012, and will unload it for about $500 million if Campbell's board approves, according to the Wall Street Journal, which broke the story yesterday and has been on top of it for months.

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“Campbell started to sell its U.S. fresh food assets six months ago as part of its successful campaign to win a proxy fight against shareholder activist Dan Loeb,” Josh Kosman and Carleton English remind us in the New York Post. A source confirmed to them that private equity firm Butterfly Equity, where Dunn is an operating partner, is close to buying the Bolthouse business.

“Butterfly Equity was founded by former KKR principal Adam Waglay, and Dustin Beck, an entrepreneur,” they add.

As part of her ill-fated effort to woo millennials, former CEO Denise Morrison pushed the acquisition of Bolthouse Farms. Morrison stepped down suddenly last May after leading the company for seven years. Mark Clouse, who had been CEO of Pinnacle Foods, was named CEO in December.

“The fresh food industry … proved to be a poor fit for Campbell. The industry requires expertise in agriculture that Campbell lacked. It is difficult as a public company to manage a fresh food business, which is subject to the whims of the weather, contrary to the predictability public investors demand. An ill-timed California drought further exacerbated Campbell’s challenges with Bolthouse,” writes CNBC's Lauren Hirsch.

“Campbell earlier this year sold its Garden Fresh Gourmet salsa business to an affiliate of hummus and dip company Fountain of Health USA for an undisclosed amount. It bought the brand for $231 million in 2015.”

“Campbell shifted back to the center of the grocery store with its acquisition of Snyder’s-Lance pretzels and nuts for $6.1 billion, including debt, in 2017. The deal made Campbell more of a snack company, but saddled it with a higher debt load that executives have said they want to reduce through divestitures,” point out the WSJ’s Heather Haddon and Cara Lombardo.

Indeed, “the management is likely to use the proceeds from the recent sales and the one under discussion to repay debt, which hit a new high after Campbell acquired a snack company in a high-value deal a few months ago, using external funding. Going through one of the worst phases in its history, Campbell is slowly getting back on track after being battered by mismanagement and financial indiscipline, which at one point had brought the company to the brink of putting itself up for sale,” according to a post on Alpha Street.

Campbell reportedly is also in advance talks with Mondelez over a a $2.5 billion deal for its Arnott's Biscuits and Kelsen Group subsidiaries. “Campbell for months had been under activist pressure from investor Dan Loeb and his hedge fund Third Point,” writes Kenneth Hilario for Philadelphia Business Journal.

Bolthouse Farms, meanwhile, is due for some revitalization and Dunn may be just the right person to oversee it. Dunn was at Coca-Cola for 22 years, leaving as president of Coca-Cola North America and Latin America. He was then briefly president and CEO of Ubiquity Brands, which owns regional snack businesses, before becoming president and CEO at Bolthouse.

In 2015, Dunn wrote a piece for the Harvard Business Review that began with an intriguing lede: “How do you make carrots cool?” 

He continued: “In 2008, when I became the CEO of Bolthouse Farms, that was the question we needed to answer. Like most agricultural businesses, the company had been preoccupied for much of its 93-year history with supply: getting its products -- primarily carrots but also juices and dressings -- from the field and the factory to the family dinner table. We liked steady, predictable demand, of course, but no one was seeking step-change growth.

“As a 20-year veteran of the soft drinks industry, I wasn’t satisfied with that. If Coca-Cola could persuade people to drink more than a billion servings of its soda each day, why couldn’t we do the same for a vegetable? Junk food companies were experts in demand creation; we just had to use some of their tactics.”

Thus were the origins of “Eat ’Em Like Junk Food."

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