BOULDER — Steve Hughes — founder of Boulder Brands and chairman and CEO of the company until last year — announced Thursday that he has partnered with a New York private equity firm to launch a new investment firm geared primarily toward the natural-foods sector.
Sunrise Strategic Partners LLC will be based in Boulder and run by Hughes and former Citigroup investment banker Vince Love. The local pair will lead the charge in finding investments and creating relationships with companies, while Trilantic North America will provide the capital.
Sunrise has already made its first investment, simultaneously announcing Thursday that it has taken a minority stake in Boulder-based PACT Apparel, which focuses on sustainably and ethically made clothing. While terms of the deal were not announced, Hughes said the PACT investment falls within the $10 million to $25 million target range that Sunrise will be shooting for with all of its deals.
Trilantic North America manages $5.7 billion in capital commitments through four private equity funds focused on the business services, consumer, energy and financial-services sectors. Hughes said the firm’s typical investment is in the $100 million to $200 million range, but Trilantic was looking to establish a model of investing in smaller companies that have revenue in the $10 million to $20 million range and are primed for accelerated growth.
Hughes resigned from Boulder Brands last June as it faced a sagging stock price and other struggles that eventually led to the company being acquired by New Jersey-based Pinnacle Foods for $710 million early this year. He said he was seeking out opportunities to partner with emerging companies in the natural-foods space when Trilantic partner Jamie Manges reached out about working together on just such a venture.
“I feel pretty lucky because I think Trilantic is going to be a great partner,” Hughes said in a phone interview. “I feel like we’re going to see a lot of great opportunities. I think we’re going to have the ability to place a lot of this money in the first 24 to 36 months.”
While some of its investments might diverge a bit from the food and beverage category — PACT being an example — Hughes said the main target for Sunrise will be retail products “that have proved themselves in the natural-foods channel and that really clearly resonate with millennials.”
“I think we’ll find a lot pretty close to home,” said Hughes, referencing the possibility of multiple deals coming from Colorado’s Front Range.
Hughes — whose background includes stints with Tropicana and ConAgra Foods, where he led the launch of the Healthy Choice line of frozen foods — came to Boulder in 1997 to take over as CEO of Celestial Seasonings, which was sold in 2000. He spent two years at WhiteWave Foods after that and did some consulting before launching Boulder Specialty Brands with an initial public offering in 2005. Over the course of the next 10 years, the company that came to be known as Boulder Brands acquired several food brands such as Smart Balance, Glutino, Udi’s Gluten Free and Evol Foods.
It was through the Boulder Brands IPO and some of the company’s acquisitions that Hughes first worked with Love, who was with Citigroup at the time.
One of those acquisitions, Evol Foods, helped lead toward Sunrise’s investment in PACT as well. PACT is owned by Boulder investment firm Revelry Brands, which was founded by Evol cofounder Brendan Synnott.
While the natural and organic category has made huge inroads into the overall food and beverage industry in recent years, Hughes said apparel is an industry where consumers are just starting to look more at where their clothing is coming from. PACT sells organic and fair-trade cotton clothing like t-shirts, sweatshirts and undergarments.
“Natural and organic rocks the food industry,” Hughes said. “Apparel has been largely untouched. There’s a couple companies like Patagonia that have taken the high road. But there’s not that many of them.”
Synnott said the connection between PACT and a natural-foods-targeted investment firm might seem like a stretch at first. But when you view the company’s cotton clothing as an agricultural product much like food it starts to make more sense. The target customers for natural foods are much the same as they are for organic and fair-trade clothing he said.
PACT, in fact, distributes nationally in Whole Foods, and Synnott said the company’s business with the natural foods giant is bigger than Evol’s ever was before it was sold to Boulder Brands.
“We’re going to be famous for selling underwear at Whole Foods,” Synnott said. “PACT is going to be most successful where natural food is successful, so we’re going to be following a similar distribution pattern as natural food.”