Stride’s Tim Burke: Consumers shift to ‘insurgent brands’ in uncertain economic times

To gain insights on the current climate for private equity deals, PE Hub and PE Hub Europe reporters have been asking a wide range of sources to share their outlooks for 2023. Our series continues now with Tim Burke, partner at Stride Consumer Partners. He has been with the firm since 2019. Previously, he was a partner at Castanea Partners.

What were the highlights of your dealmaking in 2022? 

It was a landmark year for Stride. In April, we closed our inaugural fund with $420 million in capital commitments to invest in consumer brands across the food and beverage; active lifestyle; beauty and personal care; and retail services sectors. During the year, we partnered with three exceptional companies in three of those four core focus areas: Chomps, Truewerk and Patrick Ta Beauty. We also grew the Stride team to a total of 16 investment professionals, nine of whom are at the partner level, which is a significant investment in resources on behalf of our LPs and our partner companies.

What was the biggest challenge to completing deals in 2022? 

“Uncertainty” defined dealmaking in the latter half of the year. There were concerns across several variables – from inflation, to rising interest rates and lingering supply chain issues – that led many companies to press pause on any fundraising plans. These concerns led to the slowdown in dealmaking across all sectors. That, combined with the perception that valuations would come down, kept many premier brands with enough runway to wait out the uncertainty on the sidelines.

How do you expect the first six months of PE dealmaking in 2023 to compare with the last six months of 2022?

We anticipate it looking similar: companies will continue to navigate the uncertainty, weighing their options to decide the best path forward. That said, Stride is optimistic about the opportunities in 2023. Our team has invested together for decades and through multiple cycles. We chose categories within consumer that are highly resilient, and the companies we pursue have shown that they grow through broader macroeconomic cycles. These are the brands that consumers are passionate about and will give up last, even if they pull back on discretionary spending elsewhere. In fact, we’ve seen that macro disruption can accelerate shifts in consumer purchases away from large companies (who are spending less on marketing and product development) towards insurgent brands. Because we don’t rely on debt, we are able to be nimble when we find an attractive opportunity. Once a few of these insurgent brands raise capital at strong valuations, we believe that others will follow.

What’s keeping you up at night? 

Thinking through the opportunities to be aggressive, not only in making new investments, but within our portfolio as we invest in teams, sales, product development and marketing. We’re also fixated on our diligence playbook, such that we can leverage our pattern recognition and deep analytics to assess customer loyalty and ensure that short-term exogenous variables are understood and factored into our decision making.

What are you looking forward to most in 2023? 

Doing what we do best – supporting our portfolio companies. We spend significant time with them to build out robust five-year strategic plans that instill operational discipline, utilize appropriate capital structures, build strong organizational structures and culture and pursue high ROI growth initiatives. Given that investing in high-growth consumer brands is all we have done for the last two decades, we are well positioned to add to our portfolio in this environment and help our partner companies grow in 2023.