Plan ahead: Food companies are attractive investments, but not simple ones, summit panel says

By Meg Fry
Whippany | Oct 22, 2019 at 1:00 pm

New Jersey residents spend nearly $10.6 million each day on food and beverages, said Brian Todd, CEO and president of the Food Institute in Upper Saddle River, a research organization for the food industry since 1928.

“People have to eat, and that is why this is an attractive market for investment companies, venture capital firms and banks,” Todd said while speaking on the subject of finance in the food and beverage industry at ROI-NJ’s inaugural Food & Beverage Innovation Summit last week.

“We track mergers and acquisitions in the food industry, and, through September of this year, we tracked 55 acquisitions of different food companies by private equity and venture capital firms alone, including 26 food processors and 16 restaurant firms.”

Still, while everyone has the will to win, people do not always have the will to plan to win, said Michael O’Donnell, president of the Belmullet Food and Beverage Group, a sales and marketing consultancy in Dumont.

“What a lot of people don’t understand about business planning is that you first need to answer who your customers are and why they should buy your brand,” O’Donnell said on the panel. “If you can answer those two questions, the rest of your business plan, including strategic thinking, logistics and even financing, should be successful.”

O’Donnell also recommended that attendees pair up with a co-packer when starting a brand.

“Some brands want to be manufacturers, but that is not their expertise — plus, I have seen co-packers even help finance certain brands, especially when it is a product that is quite different,” he said. “Co-packers have also seen other companies come through who have done capital raises, and you would be surprised how much information they can help you with regardless.”

Raising enough capital is of the utmost importance in the beginning, said Josh Dunaway, director of corporate development at AeroFarms, the indoor vertical farm and technology company in Newark.

“You don’t want to take on too much or too little, but it might be a good idea to have two years or so of runway to get through the next phase of growth and then reevaluate,” he said. “Also, bringing someone into your company who has the same skillset and can do the same financial and technical analyses that your investors are doing is very important — someone who can help speak that language and broker that transaction with investors to help make sure you are maximizing value.”

Meg Fry | mfry@roi-nj.com | megfry3