Campbell Soup Co. today (Aug. 7) revealed an agreement to buy six-year-old holding company Sovos Brands Inc. for approximately $2.7 billion, all cash. Sovos had 2022 sales of $837 million, a $53 million net loss but owns Rao’s premium pasta sauces, Michael Angelo’s frozen dinners and Noosa yogurt.
“The strategic transaction adds a high-growth, market-leading premium portfolio of brands to diversify and enhance Campbell’s Meals & Beverages division, providing a substantial runway for sustained profitable growth,” the acquiring company said. When you look at the two product lineups, Rao appears to be the only keeper.
Sovos Brands was formed in early 2017 by two food industry veterans. Chairman is Bill Johnson, who spent 31 years at H.J. Heinz Co., the last few as chairman, CEO and president, until it was acquired in 2013 by 3G Capital and Berkshire Hathaway.
President is Todd Lachman, who has a 25-year record in the CPG space as a senior executive at such companies as Mars, Del Monte Foods, H.J. Heinz and Procter & Gamble. Both graced Food Processing covers when their companies were named Processor of the Year.
The two set out to buy uncapitalized brands. Michael Angelo’s was their first acquisition and a few months later (mid-2017) acquired Rao's. The flagship Rao’s brand has done especially well, representing 69% of Sovos Brands’ sales in fiscal 2022 and growing organic net sales by 35% compared to the prior year.
Net income has been harder to come by. The company eked out a $2 million profit in 2021 but a $53 million loss last year. For the first six months of this year, it’s $13 million in the black.
Also today, Sovos revealed it second quarter financials. Net sales for the quarter were $218 million, up 10% year-over-year, and net income was $5 million. 26-week sales were $470 million.
“This acquisition fits perfectly with and accelerates our strategy of focusing on one geography, two divisions and select key categories that we know well,” said Campbell’s President and CEO Mark Clouse, who has been at the helm since late 2018 (Clouse has also been on our cover). Campbell already has a single pasta sauce brand, Prego, but no frozen dinners or yogurt.
Following the completion of the transaction, Sovos Brands’ results will be managed within Campbell’s Meals & Beverage division.
