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No Easter without Easter eggs! Fund manager Morgan Hielkema discussed Pete & Gerry’s Organic Eggs, one of Butterfly Equity's portfolio companies, with Eric Tommarello. This case beautifully illustrates how specialized top funds add value for Marktlink Capital's investors.
Butterfly
One of the funds in our second private equity fund-of-funds is Butterfly, based in Los Angeles. This fund is a sector specialist focusing on companies in the food and agriculture sector. Three reasons why Marktlink Capital chose to include Butterfly in the portfolio:
Interesting market segment. The food and agriculture sector is a large and growing market with several key underlying upward trends, such as increased demand for organic and sustainable products. Strong sourcing engine. Butterfly has a capable team with a strong network that knows the market well, allowing them to be at the forefront when attractive deals arise.They also possess the right expertise to accurately value deals in their niche, the capability to grow the companies, and the network within the sector to attract the right people. Confidence in the team and founders.
The founders of Butterfly, Adam Waglay and Dustin Beck, have previously demonstrated excellent results at KKR and Vista. Investing is ultimately about people, and fund managers who can manage well themselves, but more importantly, find the best management teams for their portfolio companies, make the difference.
Pete & Gerry's
When we examine the case of Pete & Gerry’s, we can clearly see how these three points resonate in the deal.
Firstly, it is evident that Pete & Gerry’s aligns well with Butterfly's sector focus. The company also fits well with broader societal trends. Due to increasing awareness of climate change and animal welfare, the demand for organic products is rising. Additionally, with general wealth increasing, consumers are spending more on premium groceries, often driven by lifestyle trends where healthy eating plays a significant role. With recent disruptions in global supply chains, such as COVID and avian flu, the importance of local egg production has become significantly greater. Overall, the demand for high-quality and organic products, like Pete & Gerry’s eggs, is increasing.
Butterfly connected with Pete & Gerry’s through its network. One of the most renowned pioneers of organic farming in the U.S., Gary Hirshberg, knew Butterfly from a previous deal with Orgain. When he learned that the family behind Pete & Gerry’s was looking for a suitable partner, Hirshberg introduced the two. This introduction gave the company’s founders enough confidence that their business would be in good hands with Butterfly. The deal ultimately went to the Californian investor, even though they did not make the highest bid. The financial component of a deal is important, but not always decisive.
Regarding management, during the acquisition, the company was still family-run. However, with the company's growth, there were significant opportunities to broaden management by appointing professional management alongside the existing talent within the organization.
Strategy
Butterfly's strategy enabled the organization to achieve significant growth: at the start of the process, the annual revenue was around 250 million dollars; four years later, it has well surpassed the 450 million dollar mark. The fund has also recently acquired Pasture Brands as part of a buy-and-build strategy. According to Butterfly, the company is well on its way to delivering excellent financial results for investors.
Happy Easter, and if you would like to learn more about Butterfly or any of the other impressive funds in our portfolio, please contact our team via the contact form below.
