Multinational corporations are increasingly buying smaller but fast-growing nutritional-supplement companies to give those brands global heft and gain market share.
The most recent example is WhiteWave Foods Co.’s (NYSE:WWAV) plan to buy Burnaby’s Vega for US$550 million in cash .
The Denver company’s June 10 announcement came two days after Connecticut-based Compass Diversified Holdings agreed to buy Winnipeg’s Manitoba Harvest for $132.5 million. Manitoba Harvest makes products such as hemp protein powder and hemp oil.
Vega founder and majority owner Charles Chang told Business in Vancouver that to get the resources needed to become a global brand, he would either have to sell the company, get outside investment or go public.
“We really felt that, of all those options, selling to a strategic company that had the same focus and already the reach, the distribution and the experience [was the best option].”
Chang founded Vega in 2004 and has enjoyed significant sales growth.
His company ranked No. 15 on BIV’s 2014 list of fastest-growing companies with $72.2 million in 2013 sales, 459% more than in 2009.
The company’s sales have risen to about $125 million in the past year, although some of that bump has come from currency fluctuations given that about 60% of its sales are now in the U.S.
Chang told BIV that all 180 staff, including about 90 in B.C., will keep their jobs and that he will remain president of the company for the foreseeable future.
Becoming part of WhiteWave is desirable, he said, because it gives him access to WhiteWave’s distribution network as well as its “toolbox” of innovative strategies.
WhiteWave is likely best known for some of its brands, which include dairy substitutes Silk and So Delicious as well as its packaged organic greens division Earthbound Farm.
Chang, who is a former BIV Forty under 40 winner, sold a 30% stake in the venture to VMG Partners in 2011 as a way to diversify his holdings and have cash on hand to potentially invest in the business.
He has also allowed employees to buy shares in the company. Chang confirmed to BIV that he owns a majority of the company, although he would not divulge his stake.
The nutritional supplement sector is lucrative and expanding.
Research firm Packaged Facts last summer projected that sales growth in the U.S. for nutritional supplements would be a steady 6% for the next several years, culminating in about US$16.4 billion in total sales by 2018.
Another indicator of a hot sector is the number of recent corporate transactions.
Ontario vitamin seller Jamieson Laboratories bought Burnaby-based women’s nutritional-supplement seller Lorna Vanderhaeghe Health Solutions Inc. (LVHS) for an undisclosed sum last June.
LVHS founder Lorna Vanderhaeghe told BIV at the time that she sold because she needed a partner with deeper pockets to expand her market reach.
Jamieson financed its transaction in part because of new deep-pocketed owners. CCMP Capital Advisors LLC bought Jamieson in early 2014 for what was estimated to be more than $300 million.
Another transaction last summer was New Jersey’s International Vitamin Corp. buying California-based Adam Nutrition Inc. for an undisclosed amount. •
