Campbell Soup advanced evolution away from shelf-stable items sold in center-store aisles to produce section with $231 mil acquisition of refrigerated salsa and hummus maker Garden Fresh Gourmet. Mich-based co's $100 mil (sales) biz will be placed within new Campbell Fresh category built around Bolthouse Farms fresh-juice unit and managed out of Calif by former Bolthouse prexy Jeff Dunn. Garden Fresh brings Campbell Fresh div's sales to over $1 bil. "Garden Fresh Gourmet's on-trend products will provide Campbell with another growth engine to help us continue to shift our center of gravity," said chmn/ceo Denise Morrison, who's been adamant about need to diversify from played-out center-store items like Campbell's canned soup and V8 Juice . . . SF-based Blue Bottle Coffee, which has played outsize role in pioneering cold-brewed coffee in US, has pulled in $70 mil in Series C capital led by Fidelity Mgmt & Research. Prior investors Index Ventures, True Ventures and Google Ventures also participated. Investors in $25.75 mil prior round last year included Morgan Stanley and U2's Bono. Influx of cash comes as co recently merged with another SF foodie institution, Tartine Bakery, with the 2 operations now comprising 20 stores in 4 cities in US and Japan. "Is Blue Bottle Coffee out to become Wall Street's next Shake Shack or Chipotle?" wondered restaurant newsletter InsideScoopSF. "It certainly seems like it."  

Investment by WhiteWave Foods into Austin-based Daily Greens proved uncommonly quick and smooth coming together of bev startup and strategic, boosted by biz and cultural fit that was immediately apparent as well as fact that Daily Greens founder Shauna Martin herself was corporate M&A lawyer in prior career. At last week's BevNet conference, folks from each side of transaction discussed origins and negotiation of deal, which closed last New Year's Eve after mere 3-month process. Non-material to publicly traded WWAV, deal wasn't formally announced but was reported by BBI in mid-Jan after references popped up in regulatory filings (BBI, Jan 13).

Speaking for WhiteWave was Stacey Galvez, dir of strategy & biz development for co's Earthbound Farm unit, while Daily Greens founder/ceo Martin offered entrepreneur's perspective of deal that in many ways reps seems to be exemplar of kinds of deals experts at conference touted: with capital partner who offers more than just money, with cultural fit thoroughly vetted, and timed well in advance of need for cash.

"We wanted smart money, strategic advice and to create some synergies," Martin recalled. She and her colleagues heavily researched other investments by WWAV and it "really seemed to have a good track record." It didn't hurt that a lot of their team was from Texas and got along very well - "chemistry is very important."

"I believe you go raise money before you need it," noted Martin. "A lot of entrepreneurs hang onto their equity a bit too tightly." Seeing how competitive fresh-juice sector was getting, she embarked on search for "nice strategic investor to partner with" as co embarked on twin goals of scaling quickly but also attaining profitability.

Shauna, who moved to juicing regimen after bout with breast cancer, clearly has enjoyed bit of charmed run as entrepreneur, judging by her account to BevNet audience: peddling 60 bottles of her "pond water" (as her friends derided it) at farmers market in Austin, and finding reps from locally based Whole Foods reps there next day as shoppers buzzed about newfangled veggie blends. Within 4-6 weeks, brand had been recruited by WF, Central Market and HEB, and that "really set the trajectory for Daily Greens," Martin noted. That was just 2.5 years ago; brand is now in almost 2K retail outlets and key player in what Shauna views as increasingly crowded and competitive space where Daily Greens wants to maintain advantage as one of first movers.

Tho co started out on $2,500 tabletop Norwalk-brand juicer, Martin recognized from start she'd need significant capital to source seasoned bev-biz talent and build out facility in Austin as showcase for how to make HPP juice (facility upgrade was detailed in BBI on Apr 8). "As a former M&A lawyer, I knew our deal was too small for a banker, and I didn't want to run a process," she told audience. "We really wanted some smart money," she recalled. "We turned down lots of offers from financial investors."

As Galvez noted, WhiteWave offered neat match to Daily Greens: it manages 2 plant-based brands in US with Silk and So Delicious, and its Earthbound Farms unit is #1 brand in organic greens and produce, key ingredient used by Daily Greens. And it fit snugly into M&A criteria of Dean Foods spinoff: high growth profile, on-trend, high-growth category where innovation will accelerate growth, and biz that can add scale, brand presence and diversification (as So Delicious itself had done when acquired last fall). "At Earthbound, if we can't get them to eat salad, we can get them to eat it in liquid form," using DG's minimal processing, Galvez noted. Tho DG's focus remains green juices, it recently ventured into protein-richer hemp milk area, another area of synergy with WhiteWave.

Galvez acknowledged that 3-month timing of deal is "probably not typical," noting that it helps if people on both sides of deal bring some experience, as Martin did as former M&A lawyer. Here's how deal unfolded:

Step 1 was face-to-face meeting, on Sep 30 at Austin facility, to make sure chemistry was right and prospective partners were aligned on goals. Step 2 was initial due diligence, spanning 1-2 months, as WWAV collected info from DG and investigated category further. "We wanted to feel good about the fundamentals of the category," Stacey said. Step 3 was an actual non-binding term sheet, negotiated in less than half the typical 4-week period, thanks to expectations being aligned and both sides experienced in doing M&A. Step 4 was a month of final due diligence, including vetting legal documents, LLC agreement, and making sure the on-the-ground rules for the biz work. Both sides worked over Xmas holiday to produce definitive documentation (step 5) in less than 2-month typical period; it was signed on New Year's Eve at noon.

Asked about WhiteWave's approach to acquisitions, Galvez said they're pursued by corporate development team at WhiteWave, not by individual units like Silk or Earthbound. And effort is not focused on specific categories - "we don't have a list," she said - as by those criteria of high growth, adding scale and diversification.  

Legal vet of hundreds of capital transactions for early-stage food and bevcos offered financing clinic at last week's BevNet conference in NY, exhorting listeners to opt for convertible financing if they can in initial round and to go with LLC corporate structure.

At issue in presentation by Nick Giannuzzi, founder of The Giannuzzi Group, was how to build strong foundation for your co without giving away rights inadvertently, getting overly diluted or finding yourself evicted from your own co. "It's too late to think about this when you're about to go down to 49% with the next round," he warned. Of course, cos operating in desperate straits may have no choice but to give away rights, and even successful ones can expect plenty of dark days, he warned. "Every single entrepreneur who gets there (to exit) has to suffer," he declared.

Giannuzzi is familiar figure in bevs, running 10-lawyer firm based in NY's Meatpacking District that over past 10 years has focused exclusively on food/bevcos - 180 clients in total. This year co will likely do 120-130 rounds of financing. First client, he reminded audience, back when he was half the staff, was Vitaminwater marketer Glaceau. (Nick's also investor in restaurants like STK and Bagatelle via The One Group, where he's board member.)

Given need for feet on street, sampling, etc, bevs is capital-intensive biz in which founders generally must undertake a round of financing virtually every year unless they have a rich benefactor, Nick reminded. That constant demand is "ultimate challenge for the founder, because finding money is hard, finding people who believe in you is hard, finding people who believe in your concept is hard." Even when you do, there are lotsa pitfalls to avoid.

First round, perhaps to raise $300K to $1 mil to fund first production run, typically goes friend-and-family route. Entrepreneurs confront 3 choices there. First, used often in tech sector, is convertible note round - say, $500K on terms where money loaned to co converts to next round of financing, generally at 20-25% discount. Advantage of convertible is "you don't really have to deal with valuation, at a time your valuation is terrible because you haven't sold anything yet . . . it's one of the ways to kick that can down the road," Giannuzzi offered. Some prospective investors reject convertible notes as way too speculative, he warned, but if anyone bites, it's great. Failing that, founders should consider common equity round. To Nick, that's much better choice than 3d option: preferred equity, which effectively gives investor downside protection. That means, if co needs to be sold at lower valuation, "they get their money back first."

"My position is, if there is any way to do a convertible note on good terms, that can often be the right choice," Nick exhorted. That flies in face of some lawyers' view that, if you're dealing with friends and family in first round, why not sell preferred? The trouble comes, Giannuzzi warned, when new investors want their round to be preferred, and superior to prior investors'. "Every time you give preferred, new investors say they want their B to be superior to A," to point where, as rounds accumulate, "by time you're done stacking all these preferred on top of each other, you have a board of 18 people and all kinds of blocking rights and other rights," Nick said. "That's why giving friends and family preferred sets a horrible precedent - I've almost never seen an exception to every other set of investors demanding preferred shares." For those who go convertible note route, next round, maybe for $1 mil, is likely to involve common shares.

Problem with preferred is compounded in current climate where multinationals buy into promising cos earlier and earlier, "eating into rounds 4 or 5," in turn pushing private-equity funds to start funding round 3 or round 2. That means you're still small, untested co, not likely to get a great valuation, but now sophisticated funds are coming in writing $850K checks for 2 board seats, 16 blocking rights, preferred shares - all in round 2. That creates "really tough decision: Do you take the money at that cost?" Nick said he spends hours each day discussing issue with clients, but "it's a person-for-person decision. Some of my founders will not be answerable to anyone, will fight for as long as they can to maintain full control of their company." They'll fight "like hell to get to round 4 or 5" until a really great PE firm comes along with $10 mil and demands some concessions. This, of course, is for cos doing very well; otherwise, money may be hard to find on any terms.

Giannuzzi also waded into issue of fundamental corporate structure. Should you start out as corporation or limited liability co (LLC)? Tho in some industries it's hard to find a buyer if you're not incorporated, in food/bev "I've always advised clients to start as an LLC," Nick offered. That offers 2 advantages: First, if you grow your co and instead of selling want to distribute your profits upward, you have a single layer of taxation vs corporation with 2 layers and "an absolute mess." And 2d, LLC confers certain advantages with respect to retention of employees, consultants, celebrity investor/endorsers, etc. Unlike a corp, an LLC can award profits interest, rather than stock options, and recipients can get capital gains tax treatment. Of Giannuzzi Group's 180 clients, probably 150-160 are LLCs. As for often-expressed fear that at some future time co will have to convert to corporate status, "in all our deals, only twice did we do a deal where somebody said you have to convert your LLC to a corporation," Nick reassured.

Another issue pertains to mgmt control: derived from partnership law, not corporation law, LLC makes shareholders key, with general partner making all decision even if there are 100 limited partners, Giannuzzi said. Power can be put in a single person or, more likely, a mgmt board that decides everything. At start, agreement is put in place "that puts you in charge of your company - we call it our 'god agreement,'" that all employees must sign acknowledging they have no rights at all. All other members are merely "along for the ride," he said.

Technical aspects aside, Nick acknowledged during Q&A that it's partly power game: "Are you hottest girl at the dance? You need to feel the market out . . . You need to be realistic with yourself." As with another BevNet speaker, Sherbrooke Capital's John Giannuzzi (BBI, Jun 4), Nick warned founders not to always reach for highest valuation possible. "That's not always so smart. It's better sometimes to bring it down a little bit to give away less rights," he said. You may end up weighing several term sheets from prospective investors - the highest, say, at $27 mil valuation but demanding lots of rights. "Maybe the guy with the $20 million valuation will actually let you run your biz," Nick suggested.  

This Mon marks 50th anniversary of merger of soft drink giant Pepsi-Cola Co and salty snacks kingpin Frito-Lay Inc to create PepsiCo, partnership whose rationale has lately come in for questioning by activist Nelson Peltz and other investors. So far, PEP has vociferously defended advantages of retail clout-bestowing pairing, so it's no surprise co is pulling out stops to herald milestone occasion. Some of hoopla will be internal, via employee celebrations at offices around world. But it's also looking to garner some upscale cred from consumers by asking top chefs in NY, Dallas, Boston and Denver to create 50 signature dishes incorporating PEP products. Social media component offers complimentary dish to PepsiCo followers who visit participating eatery and wish PepsiCo a happy anniversary . . . Members of Int'l Bottled Water Assn fanned out across Capitol Hill on Wed pushing agenda that includes reversing sales bans in national parks, fighting restrictions on use of BPA in food packaging and combating anti-bottled-water sentiment in drought-ravaged parts of US. So-called June Hill Day drew more than 3 dozen bottlers, suppliers and distributors - a far cry from hordes routinely mustered by beer wholesalers or soda bottlers in similar event, but a record for IBWA after 4 prior events . . . Tea cos are working National Iced Tea Month this month, with Starbucks' Teavana unit, for instance, inviting consumers to cadge a free Pineapple Berry Blue iced next Wed.  

Sports drink BodyArmor "is poised to earn $100 million in retail revenues" this year, notes Fortune mag, no small feat going vs iconic Gatorade. With estimated 1% of sports drink biz, cofounder and Glaceau millionaire Mike Repole claims his co is only sports drink startup to still be standing after competing with Gatorade for 4 yrs, which "has historically crushed the competition within 2," wrote Fortune. While Gatorade is "an iconic brand," Mike said he started BodyArmor because, "To me, it sounds weird that a brand I grew up with 35 years ago is the same brand that my kids grow up with. It doesn't make sense." So far, BodyArmor has grown to 100 full-time employees and has plenty of pro-athlete backers, gladly taking stake in biz in lieu of paid endorsements. "They've been very open about their strategic sales and marketing" plans, said Colts QB Andrew Luck. "They wanted a lot of input from us . . . The folks at BodyArmor appreciate the opinions of the athletes, and I think it's neat for us to be involved." Other key sports investors include Kobe Bryant, Rob Gronkowski, Mike Trout, Buster Posey and Richard Sherman. That gives BodyArmor exposure in NFL, MLB and NBA circles.  

Stoked by lobbying blitz by big-bevcos, local voters in SF soundly rejected proposed 2-cent-per-oz tax on sugary drinks last fall. So lawmakers are taking new tack now, with 3-person panel of supervisors voting this week to move along package of ideas that include on-pack warning labels. "Drinking beverages with added sugar leads to obesity, diabetes and tooth decay. This is a message from the City and County of San Francisco," proposed label would read, Reuters reports. Among other elements in package, ads for sugary drinks would be banned on city property and city depts wouldn't be allowed to purchase them. "Round 2 in the battle against Big Soda," said supervisor Eric Mar. Full board will deliberate on proposals next.  

It's unusual rebranding move: employing moniker that originally referred just to specific pomegranate variety, the LA-based conglomerate operated by Stewart and Lynda Resnick has segued from Roll Global to The Wonderful Company, as next step in evolution that's seen various produce brands unified over past 5-6 years as Wonderful Pistachios, Wonderful Haloes (mandarin oranges) and POM Wonderful. Move effective this week was inspired by recognition that half US households are buying Wonderful products, suggesting there could be advantage to bringing them together, said marketing vp Adam Cooper. Move has little immediate impact at brand level for Fiji Water or portfolio of wines, including Justin cabernet sauvignons, which will continue to ride their own considerable equity and maintain their unified sales force. But Cooper hopes move will offer greater leverage and sales for other brands, already individually rebranded as Wonderful in recent years. Co is actively seeking opportunities to bundle brands at retail in produce section or in-store circulars, he said. As part of rebranding, Paramount Farms becomes Wonderful Pistachios & Almonds, Paramount Citrus becomes Wonderful Citrus and Paramount Orchards becomes Wonderful Orchards. New logo employs heart shape as the "o" in Wonderful.

Cooper said rebranding effort took about a year, without outside agencies, by full-time team of 2 and cross-functional teams that included 50 employees across various divs. He declined to reveal cost of undertaking. Co employs 7K people and generates $4 bil in annual sales. Also in mix at Wonderful is Teleflora.  

Key exec at major grocery wholesaler in western US offered some sometimes counterintuitive advice to bev entrepreneurs: Buyers at cutback-depleted grocery chains may not be the bev experts you expect when you go in to pitch. Demand at Latino-oriented grocers for good-for-you items is rising quicker than at mainstream grocers. And among hot brands these days are Cock & Bull Ginger Beer and Knockout Energy Drinks.

The speaker was Sue Klug, evp/cmo at Unified Grocers, which claims to be largest retailer-owned wholesale grocery co-op in western US, servicing notably diverse mix of retailers, including 400+ Hispanic retailers and higher-end specialty gourmet operators like New Seasons, Green Zebra, Bristol Farms and Gelsons, with particularly heavy skew toward innovation hotbed Pacific NW. Based in Commerce, Calif, it operates specialty unit called Market Centre, which handles brands of type that natural broadliners UNFI or KeHe do, as well as private-label brand called Natural Directions that's expanded to 500 sku's and system called On Shelf that helps high-potential brands get to market.

Speaking to audience filled with bev entrepreneurs, Klug noted that skid in CSDs has convinced retailers they need to "do something different," but the realization has hit as massive headcount reductions have made it harder for the retailers to handle the additional work that comes of managing smaller brands. CSDs may have been on long decline, but they had key advantage of delegating to outside workers - the bottlers - the task of merchandising shelves, even while simplifying promotional programming. And everyone understood the role that brands like Coke and Pepsi played in people's lives. But it's a lot of work figuring out the new brands. "I can't stress how much headquarter declines there have been," putting premium on newer brands that do a good job of explaining their positioning to buyers.

One favorable development for newer brands: prevalence of slotting demands seems to be tapering off, as retailers recognize that it's more important to have the item assortments that will generate an extra trip or 2 and a higher register ring, and perhaps keep a shopper out of Trader Joe's. "Retailers these days can't make it on the buy, they have to make it on the sell," Sue said. Still, she emphasized, bev marketers need to make the commitment of attending retailers' trade shows and regional sales meetings to solidify relationship.

Analyzing scan data, Unified sees biggest gains coming in natural/organic bevs and non-dairy drinks, particularly almond and cashew milks (while soy scores noticeable decline). Hot trends are kombucha, probiotics and other fermented; HPP juices; cold-brewed coffee, organic tea and retro sodas - and not just at the natural/organic stores serviced by Unified, but in Hispanic stores as well. The top 3 sellers in specialty? Cock N Bull ginger beer, Knockout Energy Drinks (prepriced at 99 cents) and Orca craft sodas.

To stoke innovation pipeline, Unified's On Shelf program partnered with Thailand-sourced coconut water Coco Fresh, becoming exclusive distributor and turned it into brisk seller on West Coast, Klug said. At New Seasons chain, which merchandises natural/organic items next to their mainstream alternative, CocoFresh has become #1 sku in any category, outselling Tide and Cheerios. Unified undertook similar collaborative effort with Vuka functional line, thanks in part to excellent broker brand had retained, developing strong demo and ad programs, working closely with sales team and helping refine line extensions.  

Is your bev "made with love"? If you put that on label, you may get warning letter or class action suit these days, warned regulatory expert Justin Prochnow at this week's BevNet Live conference in NY. But so can just saying your item is high in antioxidants, even if it really is.

Denver-based Greenberg Traurig partner left some entrepreneurs in audience with haunted looks on their faces as he painted picture of environment in which plaintiff lawyers fan out through Ralphs grocery stores on weekend accumulating products, then study the labels to decide on the next batch of 30 letters they'll send out on Mon threatening class-action suits. If just a few mfrs settle, it's highly lucrative biz for the attorneys. By contrast, unless they spot egregious claim, regulators at FDA who issue warning letter are more likely to wait for your next round of label changes to move into compliance. Not plaintiffs lawyers, Prochnow emphasized. "This is the model of business; you have to know what you're putting on the label," he warned.

That led to corollary from fellow panelist Greg Fleishman of consultancy Righteous Brands: Don't save money by buying a year and a half's worth of labels, because what seems secure now may not be. And Prochnow offered this bit of advice on thwarting litigators: rotate your labels. That makes it harder for plaintiff lawyers to garner class status for their actions by arguing that everyone who bought product for past 3 years had relied on this claim. (Chipotle was able to dodge suit on alleged mixing of farm-raised and conventional beef when lawyers couldn't obtain class certification after being unable to prove who ate the farm-raised beef and who didn't, Justin noted.) That's "one of the best ways you can make it hard for a class-action lawsuit," he advised.

Among loaded words that are drawing increased scrutiny both from FDA and plaintiff lawyers is "healthy." You can't make that claim unless you meet specific requirements on fat, total fat, cholesterol and offer at least 10% more of recommended daily value of vitamins A, D and C, calcium, dietary fiber or protein. That was gist of FDA warning letter that Kind Bar received; within days, 7-8 different lawsuits had been filed vs co, Prochnow said.

Another is antioxidants, getting closer FDA scrutiny these days. You can't say your product is high in antioxidants unless it contains 20% or more of daily value, and then it must be tied to specific nutrient itself, say vitamin C, not just green tea. If gov't hasn't assigned a daily value to ingredient as baseline, then you can't describe your product as being high in it. Nor can you replace the word "high" with some synonym like "packed with," "loaded with" or "chock full of" - all will run afoul of regulators and litigants. Even "contains" can only be used for ingredient that comes in at 10-19% of daily value. In other words, "the FDA has now co-opted 'contains,'" Justin noted drily. So marketers have been reduced to just using words like "has" or "with," or using bullet or starburst graphic with ingredient.

Someone asked about "raw." That's dangerous, Prochnow agreed, because there's no definition of it (issue with proliferating suits over items claimed to be "natural"). So be as specific as possible, he urged. Rather than blanket declaration that item is raw, maybe write, "made with raw ingredients that then go through the HPP process." That gives less rope to the lawyers, he said.

Much of what Prochnow said will be familiar to those who've been deep in weeds formulating new bev brands. Still, his observations on first morning of 2-day conference had clear impact on rest of proceedings. Even old hands on BevNet Live Showdown judging panels showed heightened sensitivity to labeling criteria in assessing 16 new-brand contestants (a few brands flunked in obvious ways, and even winner, HPP-chocolate line called Rau, may be running risk by referring to loaded word "raw" in brand name and descriptor). Other panelists and attendees used phrases like "freaked out" to describe their reaction.

Sherbrooke's Giannuzzi: Scrub Your Claims Early During his discussion of frothy investment environment (BBI, Jun 4), Sherbrooke Partners' John Giannuzzi offered similar cautionary words when asked how legal environment is affecting investors' decisions. "Pretty crazy" situation has left level of sensitivity to claims "extremely high," he said. Investors acutely sensitive to potentially dangerous words like "raw" and functional words, meaning marketers should err on side of caution. As for strategic investors, they're "going to have a horde of regulators and lawyers on their team to scrub your claims - from the beginning you want to start as clean as possible." Over past 5 years, "these suits take no prisoners, go after big and little, and have brought people to their knees."  

Cheribundi, which last year recruited Coke vet Steve Pear to turn around cherry-based bev brand, has reached out to another seasoned soft drink exec for top sales/marketing job. JR "Mike" Hagan boasts 30 years of experience at cos including several roles within Coke, prexy of Pepsi Puerto Rico and stint at National Beverage's Shasta brand. He most recently had served as coo of Ginnybakes organic baked goods co in Miami . . . First Beverage Group has brought in David Duffy as dir focusing on providing consulting services to its craft beer clients, after career that began on sales side at Coke bottler and then range of roles at beer houses and Boston Beer, New Belgium Brewing and Great Divide Brewing. He'd founded Colorado Craft Advisors in 2012.