Campbell Soup Co.'s $231 million play for Ferndale's Garden Fresh Gourmet, announced Tuesday, bolsters Michigan's standing as a hotbed for food entrepreneurs and underscores that local and natural are the next new thing for the industry's heavy hitters.
"Our mission is to inspire the fresh revolution," said Todd Putman, the chief commercial officer of Campbell Soup's Bolthouse Farms unit, who will become general manager of Garden Fresh when the deal closes later this year. "The way consumers are moving today they like and appreciate and trust small brands that have great stories. We think Garden Fresh ... is anchored in authentic food with a great back story. It's a very strategic fit."
The all-cash deal, signed at 5:58 a.m. 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. It grew into a $110 million enterprise featuring the nation's top-selling fresh salsa and also producing private-label salsas, hummus and dips for many of the country's largest retailers.
Production at Garden Fresh's Nine Mile and Bonner facility is expected to continue — a chief priority for the Aronsons, who talk of their employees as family and rejected previous offers for Garden Fresh because suitors wanted to move production out of Michigan or change its intimate culture or both. The company's 457 employees are expected to be retained, their seniority ensured and likely offered more attractive benefits by Campbell Soup.
"For the community and our team here, I want this company to just keep growing, and this is the best way for us to make that happen," Aronson, the company's president, said in an interview. "It's really, really uncanny where this Fresh division" of Campbell Soup "is going. It parallels us. The majority of our products are all-natural; all their products are all-natural. We went organic; they already went organic. They're really on the same path we are."
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," Vice Chairman Dave 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."
American tastes are changing, too. Established food giants like Nestle S.A., PepsiCo Inc. and Campbell Soup are in the hunt for healthful brands with local cred, an entrepreneurial story 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 acquisition of Garden Fresh Gourmet is another milestone in reshaping our portfolio toward faster growing categories, including packaged fresh and organic food," Campbell Soup CEO Denise Morrison said in a statement. Garden Fresh "will provide Campbell with another growth engine to help us continue to shift our center of gravity."
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 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 produce 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 Campbell Fresh division, using the refrigerated "platform" of its 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 in 2002 to produce juices 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 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.
That will continue, Jack Aronson said. He and his wife plan to establish a foundation; they will continue their work helping troubled youth and the Boys and Girls Club; and Jack intends to spend more time working with aspiring food entrepreneurs at The Seed, the food incubator founded by Garden Fresh that he will relocate and oversee himself.
The next chapter for Garden Fresh is vindication — for the Aronsons, to be sure. But also for entrepreneurs like them — the brewers and bakers, the farmers and cheesemakers — 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.