Garden Fresh Gourmet, the Ferndale-based maker of salsa, chips and hummus, is being acquired by Campbell Soup Co. for $231 million.
The all-cash deal, signed Tuesday, caps a meteoric rise for the family-owned company founded in 1997 in the back of Jack and Annette Aronson's Clubhouse Bar-B-Q on Woodward near Eight Mile — and grounded in his insistence to "make everything to order," as he put it in a 2012 interview with The Detroit News.
Production at Garden Fresh's Nine Mile and Bonner facility is expected to continue — and may well be expanded — by the new owner, according to Dave Zilko, vice chairman of Garden Fresh. The company's 457 employees are expected to be retained and likely will be offered a more attractive benefits package by Campbell Soup.
The new owner intends to continue making Garden Fresh's trademark salsas in the five-gallon buckets Aronson used to build the company and its reputation. Campbell Soup, headquartered in Camden, N.J., plans to build a distribution center in Ferndale and likely will convert Garden Fresh's incubator for food entrepreneurs into a research and development center.
"The competitive landscape is changing," Zilko said in an interview. "Market forces are starting to work against us. Campbell's reached out to us. They made an extremely strong offer. We were not for sale. Valuations on food companies are at historical highs right now."
The reason: Established food giants like Nestle S.A., PepsiCo Inc. and Campbell Soup are in the hunt for healthful brands with local cred and good growth potential that can be marketed in the perimeter departments of grocery stores, not the commodity aisles carrying canned soup, industrial breads and mass-produced beers.
The trend making Garden Fresh an attractive acquisition also increases pressure on smaller players who don't have the resources, staff or marketing budget that food powerhouses can put behind their growing portfolio of boutique brands. Both Nestle, the world's largest food company, and PepsiCo expressed interest in Garden Fresh in recent years before subsequently acquiring brands that began to erode Garden Fresh's market position.
"A few years ago, we used to have 100 percent of hummus sales at Meijer," Zilko said. "But other major brands like Sabra and Tribe, owned by Nestle, now appear on Meijer shelves alongside Garden Fresh hummus."
The play for Garden Fresh effectively gives Campbell Soup a strong entrant in deli sections around the country. Garden Fresh salsa is the No. 1 fresh salsa in the nation; its hummus, including private labels, is No. 3, behind PepsiCo's Sabra brand; its Jack's Special Medium salsa is the No. 1 SKU of roughly 400, according to Information Resources Inc.
Garden Fresh booked sales of $110 million last year, up from $4.6 million in 2002. Its major customers include Costco, Kroger, Meijer, Safeway, Whole Foods, Publix and Loblaw's in Canada, among others. They also produced private-label salsa and hummus for many of the same customers, a trend that retailers are using to differentiate themselves from their competition.
They produce an average of 75 tons of salsa every day, sometimes more, in Ferndale. They produce 40 tons of hummus everyday, but not with canned chickpeas. They use corn kernels milled by volcanic stone wheels to produce their tortilla chips in Grand Rapids. Only Garden Fresh's guacamole is produced outside Michigan, in Mexico.
Under terms of the transaction, Garden Fresh will become a unit of Campbell Soup's California-based Bolthouse Farms brand. One of the company's fastest growing brands, Bolthouse controls 50 percent of the nation's carrot market, runs a $350 million juice business and produces refrigerated salad dressings.
A century ago, in 1915, the Bolthouse family founded a commercial vegetable farming operation in western Michigan, according to the company's website. Now based in California's San Joaquin Valley, it opened a facility to produce juices in 2002 and five years later one for salad dressing. Last year, the Bolthouse and Foodservice unit grew 5 percent over 2013 and accounted for $1.38 billion of Campbell Soup's $8.26 billion in net sales.
"The cultural similarities between Garden Fresh and Bolthouse are striking to me," said Zilko, who fielded Bolthouse's initial expression of interest before detailing the Garden Fresh business and philosophy in a "full-blown" presentation. "If we're ever going to sell Garden Fresh," he recalled thinking, "it is going to be to these guys. They're just like us."
The deal is likely to be greeted as bittersweet news in Ferndale and Metro Detroit, where its salsas, dips and distinctive orange and yellow bags of tortilla chips are fixtures in area markets. The Aronsons, who hold the majority stake in the company, are generous with their time and support community causes.
Still, the next chapter for Garden Fresh is also vindication — for the Aronsons, to be sure, but also for entrepreneurs like them who are making Michigan's agricultural and food business into forces the market cannot ignore.
Daniel Howes' column runs Tuesdays, Thursdays and Fridays and can be found at http://detroitnews.com/staff/27151.