Popchips Sold to From the Ground Up Parent Company

Powered by Real Food From the Ground Up has acquired Velocity Snack Brands Opco, LLC (VSB), the owners of puffed chip company Popchips.

Terms of the deal, which closed in November, were not disclosed. Amit Pandhi, CEO of VSB, as well as executives from Powered by Real Food From the Ground Up declined to comment for this story.

"This addition expands our roster of brands and positions us to be your go-to partner for better-for-you snacks," a notice sent to retailers late last month said. "Adding Popchips to the portfolio is true to our beginning, we never stop evolving, and striving to give consumers what they want. It's been a core value to our company from day one. The expanding Powered by Real Food From The Ground Up portfolio positions us to meet all your needs."

What's the background?

Entrepreneurs Keith Belling and Patrick Turpin founded Popchips in 2007, a year later selling venture firm TSG a reported 30% stake in the company for $25 million. Belgian private equity firm Verlinvest went on to purchase the majority of the company, including TSG's shares, in 2012.

Popchips had less than $5 million in sales when TSG invested, but, boosted by celebrity endorsers like Katy Perry and a sales team laden with veterans of the Vitaminwater brand,grew annual sales to $75 by 2012. However, at the time of the acquisition by VSB, Popchips was reportedly struggling with distribution and manufacturing issues, both impacting sales.

Under Pandhi's leadership, Popchips achieved its first profitable quarter ever in 2021 and first profitable year in 2022, reporting roughly $50 million in sales, according to a prospectus sent to potential acquirers earlier this year.

Those gains have come against the backdrop of $4.5 million in cost savings generated by cutting payroll and switching from company-owned manufacturing to a co-packer. Freight and warehousing expenses were also cut 11%, under VSB's ownership, while over 120 employees were dismissed. VSB executives also slashed the company's SKU count from 64 to 21 by streamlining pack size options and dropping the company's Nutter Puffs and Ridged Chips in order to focus on the core product line.

The snack brand also is a private label partner for Aldi, Kroger, and Safeway.

As of March 2022, when the VSB began investigating new financing options, Popchips reported 234 trade points of distribution, according to the U.S. MULO SPINS/IRI data included in the prospectus. The company reported 4% household penetration, far lower than the 26% and 8% of other better-for-you snack brands SkinnyPop and Popcorners, respectively. With a 29% increase in dollar velocity growth year-over-year, compared to the 15% seen in the "better-for-you" snack category, there was potential to see dollar gains by driving distribution.

"As the pioneer in BFY snacking, Popchips enjoys strong consumer awareness and is highly coveted by the most desirable cohort of snacking shoppers," the prospectus said. "Popchips remains one of the only independent snack brands of scale and is well positioned for long-term growth."

VMG was "open to a variety of alternatives" regarding financing, ranging from an outright sale of the brand to partnering with a new investor as they "strongly believe[d] in the long-term potential of the brand," the prospectus noted.

What does it mean?

Despite impressive growth, Popchips faced a limited pool of publicly traded strategic acquirers. PepsiCo acquired Popchips competitor Popcorners in 2019, while Hershey's Amplify has been noticeably quiet when it has come to acquisitions in recent years. Last month B&G announced it intended to exit the snacking set and is seeking to sell its Back to Nature snack brand.

Enter Powered by Real Food From the Ground Up Founded in 2018 as a portfolio company of investment and incubation platform Halen Brands, the company produces grain-free, vegetable-enhanced salty snacks under its Real Food From the Ground Up brand, as well as its newly launched You Need This brands. Halen Brands, and the firm's founder Jason Cohen, exited the company earlier this year, with president and CEO Aaron Greenwald subsequently assuming control.

When VMG announced the acquisition of Popcorners, and creation of the VSB, the firm planned to acquire and build a platform of snacking brands that could share common back office functions, such as finance and operators while also offering a portfolio of snacking options during a single sales call. However, that path never came to fruition. The capital for VSB came from VMG's fund IV, and once the VC group moved onto Fund V in 2021, the potential for any future investment or acquisitions became unlikely.

VMG general partner Wayne Wu declined to comment as to the history of VSB or the Popchips sale.

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