Chomps, a privately held maker of premium meat snack sticks, sees COVID-19 “significantly” boosting sales as consumers flock to shelf-stable products, said co-founder and CEO Pete Maldonado.
The executive said Naples, Florida-based Chomps was projecting 2020 revenue of USD 50m-USD 60m, up from nearly USD 35m in 2019, before the pandemic, and is even more confident about meeting or exceeding the estimate because of the recent surge in sales.
“A lot of people with this panic buying are trying to find quality shelf-stable protein that they can throw into the pantry,” said Maldonado, 38. “The jerky category as a whole is doing very well, even the more conventional brands. We’re seeing a lot of new buyers coming in and trying the product. It’s a short-term boost, but we see that as an opportunity to keep them as customers long term.”
Adding new retail outlets will be another factor driving sales growth for Chomps in 2020, he explained. About 25%-30% of sales are direct to consumer or through e-commerce, but the majority comes from retail chains including Albertsons, Fresh Thyme, Harris Teeter, Meijer, Natural Grocers, Safeway, Trader Joe’s, Walmart, Wegmans and Winn Dixie.
By the end of this year, Chomps hopes to roll out in Kroger, the nation’s largest conventional grocery store chain, and all Whole Foods stores, up from the current Mid-Atlantic region only, he said.
As a kid Maldonado was a fan of mass-market Slim Jim snacks, which is owned by Conagra [NYSE:CAG] and remains the meat sticks category leader, but as an adult set out to create a healthier version without sugar or artificial preservatives. Chomps meat sticks are made from 100% grass-fed and grass-finished (not fattened up with corn) beef and venison and contain no added sugars, gluten, MSG or artificial preservatives. They are also non-GMO and certified humane.
The meat snacks space, which includes jerky, attracted new entrants and investors after Hershey’s [NYSE:HSY] 2015 acquisition of artisanal jerky maker Krave Pure Foods for USD 218m. At the time it was acquired, Krave was generating USD 35m in net sales, implying a steep valuation of over 6x sales, as previously reported by this news service.
Maldonado and co-founder and COO Rashid Ali have built the Chomps brand deliberately, emphasizing profitability over sales, the CEO said. In his opinion, many if not most of the newer meat snacks companies have done the opposite and have no path to profitability.
“Nothing has sold lately,” he said of the category. “You’re going to see a lot of consolidation and brands just closing up shop,” he predicted. “Not many high-growth emerging brands are profitable.”
In addition to being approached by unprofitable competitors looking to be acquired, which the company is not interested in (“We’re not here to be some other brand’s saving grace,” he said), Chomps gets frequent approaches from venture capital, private equity and strategics looking to invest or acquire.
While Chomps has not raised outside capital and is not actively seeking to do so, it has not shut the door to a strategic partnership, the CEO said.
“The most exciting or interesting partner would be more along the lines of a strategic, being able to leverage their existing infrastructure, efficiencies and buying power,” he said. “That’s what gets us interested.”
Chomps products are manufactured by a private-equity backed co-packer in Missouri, on equipment that is owned by Chomps. For inventory and new product launches, Chomps can draw down on an eight-figure line of credit with BB&T, he said.
Foley & Lardner provides legal services and Chomps works with the accounting firms Plante Moran and the Matthew J. Soldavini CPA firm of Naples.
by Jeff Sheban in Chicago