Issue #108: Who Said CPG Fundraising Was Dead?

In October 2020, Jen Zeszut set out to reinvent the Mac and Cheese category. By November 2021, she had officially launched into the world. Along the way, she brought in Paul Earle, who spent almost three years working at Kraft Heinz in brand management for Kraft Macaroni & Cheese as a co-founder. She also brought in Deb Luster, the former president of Annie’s Mac and Cheese, who took Annie’s from $0 to $20M in sales. Quite a team if you are looking to be the leader in the Mac and Cheese space.

Together, they built out a flavor-forward, protein-enriched, high-fiber, well-branded Mac and Cheese, Goodles. Their assortment features products like Twist My Parm, Asiaigo and Parmesan spirals, and Hotshot Jackpot, chilli garlic cheddar twirly noodles. The brilliance of this combination is that they targeted both kids and parents (another one to watch with this marketing strategy: Snack Buddies, better-for-you little bites). Mac and Cheese is a product adults would eat, even if they don’t want to admit it. On the other hand, parents tend to want their kids to avoid mac and cheese and opt for something healthier. The brilliance of what Goodles put together is that it checks both boxes. You can’t even tell it is healthy (or so I have been told!). They also have been making sure these are flavors people want, that are more evolved with the current trends.

This strategy sure paid off with the customers. Goodle’s share of the market now represents 8% of total Mac and Cheese sales in the US. Kraft Mac and Cheese share is down from 42% to 36%, and Velveeta’s is down from 22% to 19%. Both of those brands are owned by Kraft Heinz. I would also anticipate Goodles is taking share from Annie’s, after the reformulation under General Mills really upset consumers. Goodles is on pace to do $100M in sales this year. The last public valuation was $88M in 2023, but the purchase price was not disclosed. I would not be surprised if it is in the $500-750M range.

For Barilla, I think this move is GENIUS. Barilla is the leading dried pasta brand in the US, and arguably the world. It did about $5.6B in revenue last year, almost exclusively from dried, boxed pasta. However, as we know well, consumers are looking for more convenience, more flavor. It has branched into more ready-made, pre-cooked pasta, but as far as I can tell, this acquisition will be the first full-meal-focused product in their sprawling conglomerate. They have never really competed in the Mac and Cheese aisle, and now they are putting Kraft on notice. The challenge of going through a merger, or maybe not, for Kraft is that they are unable to act here. I would not be shocked if this is just the first move Barilla makes in the more prepared pasta meals space. Frozen? Refrigerated? Ramen? I am sure more is going to come.

Last year, back in Issue #59, I wrote about how Target and Ulta were ending their partnership a year early. Ulta used to have stores within Target, but it didn’t really end up working, besides getting Target into the beauty game. At the time, I anticipated Target would further expand into the space on their own, and now it is coming to fruition. Last week, it launched the Target Beauty Studio. Here is what the revised concept looks like:

Overall, I think this makes a ton of sense for Target to get back into the beauty game. The key here will be the people on the team interacting with the customers and ensuring they are properly trained. As highlighted in Issue #107, experience and advisors can be key.

Fundraising is not just happening on the CPG side, it is also happening on the software side too. This week, Owner, a software company giving local business owners AI tools, starting with restaurants, announced it has raised $240M and reached a $2.3B valuation. The round was led by Growth Equity at Goldman Sachs Alternatives, featuring participation from existing investors Meritech, Redpoint, Headline, and Jack Altman. It has been really interesting to see Owner grow from a tool for restaurants founded by a 17-year-old to help his mom’s business. The results that have been reported thus far have been pretty impressive. It will be interesting to see how they try to scale to other business verticals. On the one hand, it gives them more market to go after, but for a software like this, I think verticalization can be a true differentiator.

With all the fundraising talk this issue, could not miss out on the Medici fundraising news too. For those who aren’t familiar with the Medici brand, it is the holding company for David, the viral macro-friendly protein bars, Hallpass, and a couple of other brands they will be launching. The raise brought in $250M in Series B financing and was co-led by Greenoaks and Valor Equity Partners, with participation from Peter Rahal, ICONIQ, and Imaginary Ventures. Peter is also the founder, so it is interesting to see him investing in the round; founders do not usually do that. The company is also now valued at almost $2.3B. On the retail front, Medici is now sold in 35,000 retail locations, including Walmart, Target, and Costco. It is on track to reach $300M in revenue in 2026. Pretty impressive work. However, growth on individual brands tends to slow down when a startup tries to become a conglomerate. To take parlance from the Mac and Cheese recently, look at what happened to Annie’s when they tried to expand beyond the core product. The only real exception to the rule recently has been Harry’s/Mammoth Brands. It will be interesting to see how Medici navigates those issues.

In 2013, three friends got together in Chelsea Market to start a taco stand, Los Tacos No. 1. It has blossomed beyond that. The company now operates 10 locations across NYC as well as Los Mariscos, a seafood concept in Chelsea Market. Los Tacos is known for its focused menu of tacos, quesadillas, and aguas frescas. TSG has not dabbled much in the restaurant space, but has recently invested in Dutch Bros Coffee, Yard House, and Pura Vida Miami. Financial terms of the transaction were not disclosed. I assume most of the capital will be used for expansion, especially outside of NYC. There is a clear path to hundreds of locations, as long as Los Tacos continues to focus on what it is good at and continues to turn out a strong product. Another one to follow!

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