Nosh

Under New Ownership, Kernel Season’s Strategizes Spice Over Snack

Meagan McGinnes

Chicago Custom Foods LLC, the maker of popcorn seasoning Kernel Season’s, was sold on Tuesday by VMG Partners and the brand’s founder, Brian Taylor, to middle-market private investment firm Highlander Partners. Terms of the deal were not disclosed.

Though it may have been time for VMG to exit, Kernel Season’s CEO and CPG vet Scott Lerner, who was brought on by VMG shortly after buying the brand in 2012, said he thinks the work is just beginning. Lerner previously held management positions at companies like Dapple, Naked Juice, PepsiCo and Conagra. He said he will remain on in his current role as CEO, and the rest of the team will also stay with the company.

While Lerner is still in discussion with Highlander regarding the length of his tenure under the new ownership, he believes there is still plenty to be done within the brand and the overall spice space — even beyond popcorn. To act on these strategic goals, Lerner said he thinks Highlander’s experience in the CPG space will be vital.

For Highlander, the acquisition emphasizes the firm’s recent focus on investing in high-quality food and beverage companies. So far, their portfolio in this space includes the Bevolution Group and QFG Food Group.

“Kernel Season’s is the No.1 popcorn-seasoning brand in the U.S. and has tremendous growth opportunities driven by innovation, new customer penetration and increased consumer awareness,” Jeff Hull, president and Managing Partner of Highlander, said in a statement. “In addition, we have a track record of implementing a ‘buy and build’ approach with our investments and we see significant M&A opportunities that would complement Kernel Season’s product portfolio and business strategy.”

Since being one of the first companies to enter the branded popcorn seasoning world in 2000, Chicago-based Kernel Season’s has over 88 percent ACV with its products across the country. It’s sold in more than 22,000 retailers, as well as in movie theaters worldwide accounting for over 32,000 screens. Kernel Season’s portfolio includes more than a dozen popcorn flavorings, ranging from movie theater butter to cheesy caramel corn, as well as popcorn oils and drizzles. The company also launched a line of ready-to-eat snacks last year with its Krunchin’ Kernels line.

However, the move into ready-to-eat snacks has proven more difficult than expected. Kernel Season’s team is currently evaluating the future of the line.

“I think we realized the challenges and resources that are required to launch a ready-to-eat snack and we feel like our core competency is our seasoning and topping lines,” Lerner said.

Lerner noted that the entrance of other health-focused, ready-to-eat popcorn brands like Skinny Pop and Quinn into the microwave space validates his business model and the company’s decision to stick with seasonings.

But that’s not to say snacking has no importance to the future of the company. Rather, Kernel Season’s feels it can best contribute to that snacking space and the needs of the needs of consumers in today’s crowded category by looking to how they can improve on semi-homemade snacks. Lerner said Kernel Season’s largest sales channel is retail “by far” because of shoppers’ nostalgia toward homemade popcorn as a whole.

“For the microwave and stove-top popcorn section of the store, I don’t see that ever going away because there is always great aspects of that category you are not going to get in a pre-made snack,” Lerner said. “The warm aspect, the semi-homemade aspect… Popcorn has an emotional connection to a consumer that most snacks don’t. People associate warm popcorn with happy memories.”

Though Kernel Season’s retail arm will always be a main focus for the company, Lerner is aware of how important the movie theater business has been and will continue to be for the brand’s overall success. In terms of flavors and innovation, Lerner said the team constantly looks to concession data and trends. The channel also provides promotional synergies, which the company plans to dive deeper into for 2018. Despite an overall decline in movie ticket sales, the overall revenue in concession stand items is increasing and consumers with foodie palates want more choices and bolder flavors across all of their snacking options.

“Popcorn is their highest margin concession item,” Lerner said. “Anything we can do to help grow popcorn sales, whether it be in theater or somewhere else, that is where we really win and that is our sole focus.”

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