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This aritcle is from the Australian Financial Review. Click here for the original article.
Quadrant Private Equity is betting on a Sydney business whose flavour merchants are behind some of the biggest fast-food businesses in the country.
Street Talk can reveal Birch & Waite, which works with the likes of Guzman y Gomez and HelloFresh to level up their condiment game and keep customers coming back for smokey chipotle burritos and penne alla vodka, has agreed terms that will see the storied buyout firm put growth equity into the 30-year-old commercial food business.
Sources said the Chris Hadley-led Quadrant had made the deal from its seventh buyout fund, valuing the Sydney-based high-growth, high-margin business at just above $300 million.
It is unclear whether Quadrant will take a controlling stake in Birch & Waite, which is backed by Fortitude Investment Partners. Still, it’s snagged two board seats – one for deal leader Chris Coates and another for associate director Taseen Rahman – indicating a high level of influence. Herbert Smith Freehills advised Quadrant, while Stanton Road Partners and Maddocks tended to Fortitude.
The deal is expected to be signed as early as this week. Quadrant executive chairman Chris Hadley declined to comment when contacted by Street Talk on Monday.
Fortitude partner Nick Dignam also declined to comment on the deal, but said that “premium and chilled condiments are a high-growth category tracking global trends”.
“Quick service restaurants are seeking differentiated flavour profiles through high-quality condiments, as consumers – which are confronted with the increased requirement for convenience and time/cost savings – look for a premium offering when dining in-home,” Dignam added.
Fortitude (once part of Blue Sky Alternative Investments) has been in the sauce business since 2018, joining major shareholder and chief executive Paul O’Brien on the register. He’s also expected to stay put.
On the sauce
Birch & Waite Foods is focused on two key areas – one, working with food businesses to ensure they stay on top of the latest megatrends in sauces and condiments and, two, distributing its own products to restaurants, cafés, meal-kit services and consumers with its bottles lining the shelves of Woolworths, Coles and Harris Farm Markets.
It makes salad dressings, pasta sauces, mayonnaise, and sweet and savoury sauces, and its 250ml bottles sell for about $6.
The draw for Quadrant is a way into the flavour profile megatrend, with one eye on the United States, as manufacturers rush to develop new products to keep customers engaged and coming back for more. Birch & Waite leverages off its three manufacturing facilities, working closely with customers that may lack the capability or innovation to create new marinades, sauces and the like to complement a meal.
It is understood Quadrant also plans to expand the business into new verticals – organically and via M&A – taking on small family-business-dominated categories like dips and pasta sauces, and putting it in competition with global food giants such as Unilever and Nestlé, which have been actively consolidating the premium condiments market.
The former acquired New York-based fancy ketchup maker Sir Kensington’s in a deal reported to be worth $US140 million ($211 million) in 2017, while Kim Kardashian’s private equity firm acquired a taste for truffle-infused hot sauce maker Truff last year.
Of note, Birch & Waite has made a head start on Quadrant’s proposed strategy, having ruled off the acquisition of Epicurean Foods which whips up dressings, sauces and desserts geared to higher-end customers. Epicurean Foods sells its produce to commercial customers across the country, who can order batches from as small as 15 grams to as big as a tonne. The deal is expected to beef up Birch & Waite’s manufacturing capability, thanks to added capacity and scale leverage in procurement via Epicurean’s Queensland facility.
Quadrant has been in and around the food sector for years, buying into Australian pre-packed meals company My Muscle Chef in 2020 and securing an exit from Superior Food Group this year. Its cart has also been filled with the Real Pet Food Company, Rockpool Dining Group, fast-food chain owner Quick Service Restaurants and iconic confectionary manufacturer Darrell Lea.