Sovos Brands files for $100M IPO

Dive Brief:

  • Sovos Brands has filed for an initial public offering that could raise $100 million. The Colorado-based company, founded in 2017, owns Rao’s Homemade pasta sauces, Noosa Yoghurt, Michael Angelo’s frozen offerings and Birch Benders pancake mixes. The number of shares and price range have not been determined, Sovos Brands said in an email.
  • The company has seen strong growth since its inception, with net sales increasing at a compound annual growth rate of 66% from 2018 to 2020, according to its filing with the U.S. Securities and Exchange Commission. Net sales for the 26 weeks ending June 26 were $351.2 million — an increase of 34% compared with the same time period in 2020.
  • The IPO market for food and beverage companies has been relatively busy this year, with soda maker Zevia, oat milk titan Oatly, cell-based meat maker Meat-Tech 3D and produce giant Dole all having traditional IPOs. Several companies are rumored to be working toward IPOs, including yogurt maker Chobani, which confidentially filed with the SEC last month.

Dive Insight:

According to the prospectus at the beginning of its filing, Sovos Brands says it is the fastest-growing food company of scale in the United States. A $100 million IPO could certainly do a lot to further speed that growth.

Sovos Brands got its start when former Mars, Del Monte and Heinz executive Todd Lachman noticed the way disruptive “one-of-a-kind” brands in the food space were routinely taking away market share of much larger legacy brands. The company, which takes its name from the Latin word for “one of a kind,” started out by acquiring two high-end Italian food brands: Rao’s Specialty Foods and Michael Angelo’s Gourmet Foods in 2017.

In the past four years, the number of portfolio brands has grown much more slowly — Noosa became a part of Sovos in 2018 and Birch Benders was acquired last year — but sales have not. Sovos seems to have been successful at finding and buying four disrupters with great potential. Rao’s — which has expanded under Sovos’ ownership from sauces into dry pasta, frozen entrees and soups — was the No. 3 pasta and pizza sauce brand by dollar sales in the 26 weeks ending June 13, according to statistics in the filing. The brand currently represents 55% of Sovos’ product sales, and the past five years have seen household penetration of the sauce skyrocket from 1.3% in 2016 to 9.6% in the 52 weeks ending June 13.

Statistics presented in the file also indicate that Noosa and Birch Benders are among the fastest-growing brands in yogurts and pancake and waffle mixes, respectively. And Michael Angelo’s frozen dinners have a 4.9% household penetration in the 52 weeks ending June 13.

While Sovos has had a portfolio of buzzy companies, the true picture of its success hasn’t been clear until now. By putting its finances out to the public, it’s easy to see the steep growth of the different brands the company owns. Since the Sovos acquisition, Rao’s dollar sales have more than quadrupled, while Birch Benders saw 50% dollar sales growth in the 52 weeks ending June 13.

“We believe that we are at the cross section of scale, high growth and high margin, but still have room to continue growing and improving,” the filing states.

While potential shareholders may pause at the small size of Sovos’ portfolio, the company has a growth story to tell. The IPO would immediately add to Sovos’ buying power and allow it to continue bringing brands with disruptive potential under its wing. According to the filing, the company has evaluated more than 200 brands for acquisition since 2017. While some of those brands may not have been a good fit, the price might have been too high for others. An IPO could reduce that barrier — both through the infusion of cash for Sovos and the sheer fact that publicly traded companies have their financial books open. Sovos has a positive track record, and a startup that’s on the fence about selling might find itself moved by looking at the rest of its portfolio.

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