Good morning, Hubsters. MK Flynn here with today’s Wire.
Since the beginning of the year, I’ve been conducting Q&As with high-profile investors on various themes and trends. Today, my series continues with a look at what it takes to succeed in the food and beverage industry.
Donuts and pretzels. The best opportunities are family- and founder-owned businesses and corporate carveouts, Peak Rock Capital’s Yoni Riemer told me. The Austin-based firm has made 13 platform investments in the food and beverage sector over the last 10 years. Last year, the firm sold of Dot’s Pretzels, the owner of Dot’s Homestyle Pretzels, and Pretzels Inc., to Hershey for $1.2 billion.
When asked what makes a food and beverage business attractive, Riemer responded:
“Businesses that have resilient and recurring demand profiles as well as excellent operational capabilities, and where management teams have demonstrated an ability to execute their growth plan throughout volatile markets, are likely to be more successful than businesses that are more dependent, or sensitive to, more fickle consumer trends.”
As for the future of dealmaking in the sector, he explained:
“We expect inflation, lack of labor availability, and supply chain disruptions to continue to challenge mid-market businesses for the foreseeable future. Core to our strategy is investing in businesses that are more resilient in economic dislocations, sell consumable and non-discretionary products, have long-term recurring customer demand profiles, and in some cases, are attractive substitutes to consumers wishing to ‘trade-down’ in times of economic uncertainty. For example, our portfolio includes Shipley Do-nuts, a beloved consumer brand. We think being able to get an authentic and high-quality cup of coffee and doughnut, at a third of the price of Starbucks, is a particularly attractive business proposition in general, and even more relevant today than it has been in the last decade.”
Solar power. Community solar projects have become an attractive way to offer renewable energy to both commercial and residential users, satisfying the investment appetite for large PE firms such as Apollo, which made a $175 million strategic investment in Summit Ridge Energy last week.
PE Hub’s Ob Martin Manayiti caught up with Apollo partner Corinne Still to understand more about why this is the right time for the firm to invest in this space. She, along with Wilson Handler, another partner at Apollo, will be joining the Summit Ridge board.
“We have been tracking the community solar space for quite some time,” Still said. “The sector has really evolved and matured as more states have adopted programs and utilities and other stakeholders have embraced community solar as an attractive way to offer renewable energy to both commercial and residential users.”
Summit Ridge, headquartered in Arlington, Virginia, has been a key player in championing these community solar projects. The company expects to have more than 500 MW of solar and 100 MWh of battery storage projects online by next year, thereby providing energy savings to approximately 175,000 residential and commercial customers.
“In a way, it’s very similar with farm to table, it’s like solar power to table,” Still said. “It’s all within the ecosystem of a given state.”
Oil and gas. Buyouts’ Kirk Falconer reports this morning that Kimmeridge, an energy private equity firm with an activist bent, exceeded the $500 million target for its second public engagement offering, according to sources. Kimmeridge Energy Engagement Partners II, launched last November, will continue fundraising with an eye toward the vehicle’s hard-cap of $1 billion, sources said. (Kimmeridge declined to comment.)
Oil and gas PE fundraising has been mostly in decline since 2014, as multiple challenges, among them industry supply gluts and price wars, eroded performance. Many LPs also eschewed the strategy due to limited payback on substantial amounts of committed capital as well as ESG concerns.
If Kimmeridge’s latest offering hits the $1 billion cap, it will be one of the largest traditional energy pools raised in recent years.
Along with its activist strategy, Kimmeridge invests in privately held, low-cost unconventional oil and gas assets in the US E&P sector.
Kimmeridge also has a carbon solutions strategy to invest in ways to lessen the oil and gas industry’s environmental footprint, PE Hub reported previously. This year, it seeded with $200 million the start-up of Chestnut Carbon, a nature-based carbon offset platform.
For more, read the story.
Strength in numbers. Mid-Ocean Partners has launched the Women’s Awareness Initiative to bring together institutions committed to advancing gender diversity in the asset management industry. WAI will seek to achieve this mission via workshops and programming aimed at helping women build relationships and hone career-related skillsets. Established by MidOcean managing director and ESG/compliance officer Candice Richards, WAI is endorsed by Institutional Limited Partners Association. Founding members include The Riverside Company, Avante Capital Partners, and Churchill Asset Management.
“The goal is to make a multigenerational impact,” Richards told PE Hub’s Aaron Weitzman. “There is strength in numbers, and we want to teach women and especially young women that inspiration is knowing your possibilities and knowing you are invincible and can do anything.”
I’m looking forward to seeing WAI in action!
That’s all for today. Buyouts’ Chris Witkowskiwill write tomorrow’s Wire, and I’ll be back on duty Wednesday.