On June 5, Hanover, PA-based Utz Quality Foods, LLC and New York-based Collier Creek Holdings, a special purpose acquisition company (SPAC), announced they were merging in a $1.56 billion deal. The new company will be known as Utz Brands, Inc. and will become a publicly traded firm when the transaction is completed. Current Utz CEO Dylan Lissette, who has been with the family-owned company since 1995, will remain chief executive officer, a post he has held since 2013. Roger Deromedi, co-founder of Collier Creek, will become Chairman of the newly formed public company upon closing, which surpassed $1 billion in annual retail sales earlier this year. Deromedi, who spent his career in the food business, was formerly CEO of Kraft and Chairman of Pinnacle Foods. Utz will celebrate its 100th anniversary next year.
Food World/Food Trade News: Congratulations to both of you. We have known Dylan for many years and the Rice family even longer. This seems to be a real win-win. I know Dylan has been to this dance at least once before. But this seems very visceral and positive. Obviously, with your background in the industry, Roger, this is a unique dynamic that I don’t think resembles any of the other potential walks down the aisle that Utz has had.
Dylan Lissette: I like walking down the aisle knowing that Roger has helped create a great business with Pinnacle and I am excited to be partners with him.
Food World/Food Trade News: This is not going to help you based on your age Roger but by the end of a full day with Dylan, you will be worn out.
Roger Deromedi: I think Dylan realizes that I keep up pretty well, don’t I, Dylan?
Dylan Lissette: It is actually really funny, I was talking to Cary Devore (Utz CFO) recently and I was like, “Roger really impresses me. The guy puts out work and in fact he is working as hard as me, if not harder”. I don’t give that compliment out to many. Many people know how hard I work, but it will be a good 1+1=3 with both of our brains working as hard as we both do.
Roger Deromedi: I agree. The timing is excellent. With my knowledge of the Pinnacle playbook and Dylan’s deep experience of the snack food category, it is going to be a great way to combine our skills. We have been talking about ways to execute our planned virtuous cycle of generating cost savings and reinvesting them back into the business to accelerate our growth. We are well under way and plan to make a difference in many ways.
Food World/Food Trade News: That’s great, and I actually have a question related to the Pinnacle history later on. Let me start at the beginning. When did the conversation between your two companies begin and how did it progress to the point leading up to the announcement?
Dylan Lissette: Interestingly enough, I think I talked to Jason (Giordano, another co-founder of Collier Creek) well over a year ago. These guys had created their SPAC (special purpose acquisition company) and Jason and I knew each other from years back so he contacted us and said that they were interested. We continued to talk more over time. We ultimately met for lunch at BWI (Baltimore-Washington International airport). I got to know Roger a little bit more and we talked a lot about strategy – what we would do, how we would utilize the capital, and what we could generate if and when we ever combined into an entity that went public through the Collier Creek SPAC.
From there, as we got a little further in, we wondered what it would look like by comparing strategies – what was your strategy at Pinnacle, how would you look at our business, and what are ways that we could collectively improve Utz. We really want to grow. We envisioned what Utz, which is now a $1 billion dollar + business, would look like if it became $2 billion. Then, when it became a $2 billion business, what would we have to do to make it a $4 billion business. Both of us had these dreams that we could use this platform of fantastic brands to build upon. That conversation ensued over months and got more definitive over time. All along the way, we just got closer and closer on strategy and closer and closer on all of the administrative and financial aspects of the deal, and it ultimately made a lot of sense.
Roger Deromedi: That is a great synopsis and that is exactly how it all flowed and as you can imagine, we kept the lawyers very busy, because to get all of this stuff done, to create a public company out of a private company, takes a lot of work. Not only was there time spent on the alignment of strategy and how we are going to move ahead, but we were very focused on getting everything right in terms of how this is going to work going forward from a legal structure point of view. We are happy that we got all of that stuff figured out and you can see more of that in the proxy. We are making great progress.
Food World/Food Trade News: I think that the SPAC formula is interesting. You don’t have to do the traditional roadshow and go through that rollercoaster. You probably went through a different kind of internal rollercoaster to get to this point, but it is nice to know that all of that hard work in essence could lead to something where you essentially flip the switch and get going, rather than prolonged, delayed, often interrupted traditional process. Would you agree?
Roger Deromedi: That is clearly one of the benefits of a SPAC. You have an agreement between the two parties that becomes what you market to the investors of our current public company which is what we have been doing after the announcement. With a SPAC process, vs. a traditional IPO, it is not that we don’t have to continue to tell investors what’s happening, we do. That is true of any public company. You are continuously doing that and obviously we had our investors in Collier Creek Holdings from the start almost two years ago. So, we had the cash, but we still have to convince them that they want to roll that cash into the CCH/Utz combination. Given the market reaction so far since announcement, I think that is not going to be an issue and we will get to closing in a couple of months. So, it is not that you don’t have to keep talking to investors, because they are one of your key stakeholders, but there is less uncertainty about valuation and so forth.
Food World/Food Trade News: Roger, can you draw parallels from your experience, at least in this early going, from when Pinnacle was set up to what you have experienced or newly learned from helping to construct this deal?
Roger Deromedi: That is why we have told investors that Utz is a perfect fit for what we did at Pinnacle. But, actually, in the case of Utz we are actually at a much better starting point than where we started with Pinnacle, both in terms of having things in place to take advantage of but also in terms of the opportunities in front of us. When Blackstone acquired the company in 2007 and I was named Chairman, we started the cycle of going after productivity to then reinvest back in marketing, but there were not as many tools in place to help do that. Dylan and his team have done a great job setting up the company to really accelerate that productivity by establishing, for example, a working and effective project management office (PMO) and a soon-to-be-finished ERP (Enterprise Resource Planning). So, we are in a much better place to start capturing the productivity savings to then reinvest back into marketing.
Then we start with the most important thing, which is that the salty snack category is a much better category than the various categories that we had at Pinnacle. When you have a category growing at four percent a year, that is a great category to be in. At Pinnacle, we had flat and declining categories. We had to use some of our marketing thinking to turn around frozen vegetables and to make Birds Eye a success. That takes a lot more effort and work than just capitalizing on the growth we have in a category and taking the great brands and riding that. I think Utz is a perfect fit for our playbook and it is a better starting point which we think will deliver even better results.
Food World/Food Trade News: Would you categorize at least some of the brands that Pinnacle acquired as spin-off brands from other major CPGs that those sellers no longer thought had a lot of growth?
Roger Deromedi: We were very open about that. The tagline we used when we actually went public was ‘reinvigorating iconic brands’ and what that meant was iconic brands that were spun off from other companies. When you think about Duncan Hines, Vlasic, and Log Cabin, that is exactly what they were and the magic that Pinnacle did was take some of these brands that didn’t get needed attention and give them attention. That was the Pinnacle story, but that is a very different story than Utz. Utz has terrific brands in terms of the iconic brand Utz, along with Zapp’s, Golden Flake, Boulder Canyon, & Good Health to name a few. We have great brands to start with like the Utz brand which has been nurtured for a hundred years. It’s a different starting point.
Dylan Lissette: In terms of analogies between the two, and obviously, I wasn’t at Pinnacle, I really think of it as having, as you indicated, from a consumer perspective, from a trade perspective, a very well-loved brand, rooted in a hundred years of doing the right thing. It’s rooted in having a great quality product and having great quality people that bring it into the stores and work with our retail partners. I liken this combination more as the spark that lights the match. Imagine the little flame of the match going to the stick of dynamite that lights the rocket ship and then the rocket ship propels forward. It is the fuel that essentially goes into our next century of growth. So, here we are, we have accomplished much in a hundred years. We have done amazing things. We’ve got a billion plus dollars in retail sales. We did it doing the right things with our community, with our associates, with our customers, and with our consumers. All of that and now we are turning this corner into becoming a public company, lighting that match, letting the wick burn and then, ‘Boom!’ Upon closing we really have that fuel set up to just accelerate, because we did so much work in terms of acquiring businesses, integrating them on to our platform, unifying ERP systems and back ends, and cultures, and policies and distribution.
When you think about our acquisitions from the most recent of ConAgra’s DSD snack business to Golden Flake (which at the time was a very big acquisition for us), all the way back to Zapp’s in 2011, we have done a lot of work over these past 10 or 11 years to build a national platform, to build a billion dollars’ worth of core business. And now, along with the capital that comes onto the balance sheet, think about the synergy of minds and strategies and policies and whatnot that a combination of a great board, and a great team, can do to our platform. Someone asked me the other day what companies you would aspire to be. I really didn’t have a great answer, but I thought about companies like Smucker’s, I thought about companies like Sam Adams, as an example, the beer company. We are really looking forward to the next hundred years and what that may look like for the company.
Food World/Food Trade News: With more potential capital to work with and the reduction of debt under the old privately held structure, do you have any specific acquisitions or targeted areas that you feel that you can now better pursue?
Dylan Lissette: I’d say that I am motivated by growth of our brands and our company. One, because it obviously gives us scale and relevance with an ever-consolidating customer base. You Jeff, as well as anybody, know that the customer base is consolidating. The more that we have a great brand portfolio, the more that we have a great distribution network that is geographically large and diverse, the more talented we are in terms of consumer insight and innovation, all of those things that come with growth, the better off we are not to just survive but to thrive which is a key word that we use a lot here at Utz. So, yes, the capital comes on and reduces the debt and puts us into a great position.
I think looking for M&A opportunities that expand our geographic reach or expand our brand portfolio into subcategories that we are not meaningfully in or gives us greater exposure to certain channels where we might be a little bit under-penetrated such as C-store and Mass – There are all kinds of opportunities, adjacent categories, some of these smaller BFY (better for you) brands that may resonate very well with the consumer, but don’t have a platform of warehousing, logistics, sales team, distribution, marketing – all of the things we have would do well for us.
If you think about it, we are really the only stand-alone pure-play snacking platform in the United States of scale. As a public company we will be well poised to be the potential consolidator of choice. We are good at it; our team ultimately is good at it: from sourcing to integrating and really that is a fine art because it is not just a financial integration. It is a cultural, strategic, brand portfolio integration when you do these. This isn’t just bolting it on. It is backend systems, it is culture, it is leadership, it is people, it is communication. It is all of those things that go into a successful integration. I think we are really good at it. I think we can look forward to M&A being one of the core platforms of growth for the company.
Roger Deromedi: Dylan, I don’t know what to add other than to say that you are not just good at it, you are really good at it. Acquisitions are an important part of our go forward story and obviously now we have the balance sheet that gives us room to do that. After this transaction, we will be down to 3.1x debt-to-EBITDA and barring any acquisitions, we improve that by about a half a turn a year. So we have plenty of fire power to make future acquisitions.
Food World/Food Trade News: You have done a lot of deals in you long career; Roger is there any area from your purview that might differ from Dylan’s previous growth direction? From not the up close and personal view that Dylan has with day-to-day matters, but more as an objective analyst?
Roger Deromedi: No, we have been working in alignment in terms of our M&A strategy focusing on branded snacks in the U.S., and more specifically salted snacks. As Dylan said, there are opportunities for further geographic expansion, increasing our presence in some subcategories of the overall salty snacks where we don’t have as strong a presence. So, we are very much aligned with where those opportunities are. What we love about the salty snack category is that there are so many targets that you can go after. It is a very robust list. Some smaller ones, but also larger ones that could be transformative. With being a public company, we have equity and we have room to do a wide range of acquisitions. We are very much aligned in what they are. I don’t have a different list than Dylan. We have the same list.
Dylan Lissette: What is interesting is what I truly believe, beyond our core competencies….I personally have been in the industry, many on our team have been going to snack food conventions for 24 years. My in-laws have been going for 45 plus years probably. My wife remembers being seven years old and being at regional snack food meetings decades ago. So, we have been very involved in the industry. We know a lot of the players. We are very communicative. So, we think that also helps us to sort of look at the pipeline, know who some of the folks are, have a great dialogue with them and ultimately, when and if it ever makes sense for some type of a combination or what not we are in a great place to execute on that if they are so willing.
A great example – we acquired Kitchen Cooked in December of 2019. Kitchen Cooked was in the selling family’s ownership for decades, and their president, their owner, a member of the family is still with us today, six plus months later. We talk all of the time. We are growing his sales in Illinois, in his route system. He is selling more of his product. He is selling more of our product. We presume he is very happy with the leadership and the communication and all of those things. Ultimately, you just have to really be good at what you do, but also set it up so that people’s knowledge of you as an acquirer is predicated on your past experience with others. You live by the reputation you create. And I think we have a good reputation as well, which helps.
Food World/Food Trade News: I will ask you this next question Dylan, because it has been asked of me in the last few days: even though this may not have been your first priority, do you see this move as a potential long-term exit strategy for the Rice and the Lissette families?
Dylan Lissette: Obviously, it opens up more optionality with a publicly traded stock. I am 48 years old. I have a lot of juice left and passion for the business. I love the business. I love the people. I actually couldn’t imagine going down a different path than doing this merger with Collier in which the family sold a very small share of our equity stake, basically to make the math and the deal and the share counts work. We are retaining a massive amount of equity in the new company. We will be the 50 plus percent shareholder owners of it. With the partnership between Collier and with public stockholders, I look forward to just continuing to build Utz as we have. With a very long-term oriented, compound growth-oriented type of mentality.
I think if we wanted to exit, we would have looked at a different outcome. I know my father-in-law is really excited about this. If you can imagine when his grandparents, in 1921, started the business with a 50 pound an hour cooker in Hanover, PA, and you think of how far we’ve come, through the efforts of so many before us, it is amazing. It’s amazing that we broke all odds relative to a family business, which most never make it to the third or fourth generation, let alone fourth to fifth generation. The numbers are extremely low. I think it is 3 percent from third to fourth. So for my father-in-law, I think he is very excited to sit on the precipice of a new day and looks forward to beginning the journey of becoming an iconic food company and becoming possibly a multi-billion dollar CPG company that delivers for our shareholders by creating value, that provides snacks for consumers, and that supports all stakeholders and our community. I think this merger is fantastic for the Hanover community, because this is the community that got us here and this helps to solidify for years to come. Hanover will be the headquarters and the mecca for our operational base. So, I think it is really exciting overall.
Roger Deromedi: We look forward to holding our board meetings in Hanover.
Food World/Food Trade News: Roger, what will your role be as chairman of this new organization? How do you envision that?
Roger Deromedi: My role is actually very simple. My role is to support Dylan and his management team and help him and help them make the company successful. It is as simple as that. Obviously, I oversee the board and corporate governance, but from a personal perspective, I will be helping Dylan in whatever ways he wants me to.
Food World/Food Trade News: And Collier Creek is two years old, approximately?
Roger Deromedi: It is 18 months old. We started in October 2018. When we close this transaction in August or September, Collier Creek goes away and the new company going forward will be called Utz Brands, which will be traded on the New York Stock Exchange under UTZ.
Food World/Food Trade News: I have asked the questions that I want to ask. If you would like to add anything that you think might be germane or interesting for our readers, now is the time to freelance a little.
Roger Deromedi: Obviously, there is the investor perspective about this transaction, but from a retail customer and consumer perspective, they should feel very good about it as well. I think it is going to create opportunities for Utz to get even bigger and stronger in the industry and support the growth of the salty snack category for our retailers.
Dylan Lissette: When I think about our customers, the SVPs, the category managers, the CEOs, the buyers, that are reading this article and going, ‘Uh-oh, what does this mean?’, it is just naturally the reaction. ‘What does this mean to me? What does it mean to my organization?’ And I wholeheartedly agree with Roger that a lot of our success has been achieved by conservatively picking our spots to spend our capital. The industry average advertising spending for brands like ours is about 4 percent. We’re spending about 1 percent to promote the Utz brands. If you think about the fact that with the new capital, and new talent to help guide the strategy, both from Roger and also other skilled board members, we can improve in many areas. For example, our board has broader knowledge of things like marketing. This should only be a positive for our retail customers to see this news. This allows us to become a better innovator, a better marketer – a better overall opportunity to lean in more for our customers.
So, I think this should be taken away as an amazing thing for Utz to do. To get here after 100 years. How many brands are able to say that they made it to 100 years, a billion dollars, then went public and continued to grow. This is exciting!
Food World/Food Trade News: Absolutely. Congratulations to you both.