This is the Colorado-based company’s second investment in 2018, following the investment earlier this month in the confectionery brand Little Secrets, the natural and lower-sugar alternative to M&M’s and KitKat.
Hughes did not disclose which snack producer would be ploughing investment into, however, he did reveal it plays in the similar snacking space to Little Secrets, with products that are “indulgent, yet clean [in terms of ingredients].
“It’s a massively exciting time for value-added bakery and snacks,” he said.
Sunrise’ history and investment criteria
Hughes collaborated with private equity firm Trilantic North America to form Sunrise in 2016 aimed to accelerate the growth of emerging brands.
Having worked in the natural and organic food industry for over 30 years, he launched Boulder Brands, which manages frozen snacks brand EVOL and gluten-free bread producer Udi’s in Colorado.
In 2015, Hughes left Boulder when the company was sold to Pinnacle Foods. Today, Pinnalce is now part of Conagra, which acquired it for $10.9bn.
Regarding Sunrise’s latest investment, Hughes told BakeryandSnacks it is looking to invest in companies that have an average annual revenue between $10m and $25m, a “very strong proof of concept and a high appeal to millennials [who demand for more better-for-you snacks].
“We feel connected with founders who can create high-value and high-impact products, and we want to bring them growth expertise [to help them build retail partnerships and expand markets] rather than just capitals,” said Hughes.
Kodiak Cakes and Perky Jerky
Sunrise earlier investments include pancake mix producer Kodiak Cakes and dried meat snacks producer Perky Jerky – both which today are experiencing high annual growth thanks to the increasing consumer demand for gluten-free and high protein products.
“Kodiak Cakes have really taken off and is worth $100m in retail value now… The brand became a ‘gas in the tank’ for us,” Hughes told us.
He added that within a year that Sunrise had partnered with Kodiak Cakes in mid-2016, the US pancake mix sales grew by 6% to 10%.
Perky Jerky too is today a top performer in the meat snacks segment, a category that has been attracting a lot of attention following General Mills and Hershey’ acquisitions of Epic Provisions and Krave in 2016 and 2015 respectively.
“Perky Jerky has been doing extraordinarily well, accounting for 50% share of Whole Foods’ overall jerky category. It is also launching new products, including a Wagyu beef-made jerky, this coming fall,” he said.
Kodiak Cakes and Perky Jerky currently make up one-third of Sunrise’s total revenue, which is about $300m, growing by 50% year-over-year, according to Hughes.
He revealed Sunrise will continue to look for additional opportunities in the bakery and snacks categories besides the latest addition, as they are “complementary” to its portfolio.
He added almond flour could be the next alternative wheat flour.
“White and whole wheat flours have been around for at least three generations, and we need new flours that can entice back consumers, who walked away from baked goods due to a gluten allergy,” said Hughes.