Josh Goldin, Co-Founder of Alliance Consumer Growth, speaks with GrowthCap about his firm’s successful start as a consumer-focused investor and recent big wins in the space.
RJ: Josh thanks so much for joining us. You’ve had some great recent successes with Shake Shack’s IPO and KRAVE Jerky’s sale to Hershey. Maybe we could just kick off with a brief overview on your firm, Alliance Consumer Growth?
Josh: Alliance Consumer Growth is a four year old firm founded by Julian Steinberg, Trevor Nelson and me. We are based in New York and invest in consumer, retail and restaurant companies across North America. We established our firm because we saw an opportunity to partner with rising-star consumer, retail and restaurant brands that are at a unique inflection point: proven enough that there is no concept risk, but still young enough that there is substantial growth opportunity ahead. We often invest as minority-non-controlling shareholders, and I think we have developed a lot of expertise over the years about how to be an entrepreneur-friendly minority investor. The sectors we focus on include branded food, beverage, personal care, beauty, apparel, specialty retail and fast casual restaurants.
We focus on young, rising-star brands that are seeking a value-added, industry specialist growth partner, but don’t want the dilution from a huge equity infusion from a larger investment fund. In 2011 we raised our first fund, ACG Fund I, which was a $44 million fund. We made seven investments from ACG Fund I and were fortunate enough to be able to raise a second fund, ACG Fund II in 2014, which is a $90 million fund. Our thesis and strategy is exactly the same in both funds.
We feel fortunate to have, in a relatively short period of time, been able to invest in some phenomenal brands led by extraordinary teams. Whether it’s Shake Shack, KRAVE Jerky, Suja Juice, PDQ Restaurants, barkTHINS or Honest Kitchen, I think every one of our partner companies is a unique entrepreneurial story. We’re very proud of what these companies are doing, and fortunate that these entrepreneurs wanted us to be part of their journey. At the end of the day it’s very gratifying for us when you can have an exit, for example, like KRAVE just had where they were acquired by Hershey. It’s gratifying because our LP’s who put their trust in us had a terrific outcome, and just as importantly, it was phenomenal outcome for KRAVE’s founder Jon Sebastiani and the team members at KRAVE, many of whom had significant wealth creation events and a big win in their careers. We’re deeply grateful for the work that the team did to build a terrific business.
RJ: You have demonstrated a keen eye for spotting good investments. Can you talk high-level about how you have been so effective in selecting winners?
Josh: We try to stay focused on a small subset of consumer categories that we have come to know pretty well. We’re looking at more than 500 new deal opportunities per year in a just a few targeted categories. This has helped us develop intuition and get smarter over time about which criteria and data points correlate to growth and success in consumer, retail and restaurants. We also have a preference for larger categories as opposed to smaller niches. For example, Shake Shack competes in the $70 billion U.S. burger category which is the largest subcategory within restaurants. So we tend to start with large categories and then within those categories find emerging brands that have really created something innovative, different and special. And then our work begins and we have to determine how it’s working and how scalable it is for which we also collaborate with a lot of smart advisors and consumer industry professionals to help us assess that.
RJ: That’s fantastic. Could you share some of the different types of value-add that you provide to the companies you invest in?
Josh: After we make an investment, we work actively with our companies to help them grow. We’ve tried to learn a lot from others and from our own experiences, and what we’ve done is we’ve put together what we call our “ACG toolbox” of resources that our entrepreneurs can draw from as they desire. We provide resources related to brand and team building, product development, package design, retail strategy, manufacturing, financial reporting, and several other important areas. Our portfolio companies will also often help each other. We encourage collaboration and sharing of ideas and best practices across all of our companies because we typically don’t invest in any two companies that are directly competitive.
RJ: Great. The knowledge sharing that you can facilitate is a true advantage for anyone you partner with. This has been very informative. Our readers, many of whom are in the family office and ultra high net worth universe, will find this very helpful. The emerging growth consumer space is one that we too have found is very exciting so this is a great opportunity to showcase your work in the segment.
Josh: Absolutely, thanks so much RJ.