Kroger and Lindsay Goldberg Partner to Form PearlRock Partners On May 14, 2019, Kroger and Lindsay Goldberg, a private investment firm, partnered to form PearlRock Partners. PearlRock Partners is an investment vehicle created to identify attractive consumer product brands, invest in them and foster their growth. Some of the key focus areas for PearlRock Partners include:

• Identifying emerging consumer brands with strong growth potential.
• Promoting the small consumer brand ecosystem.
• Facilitating data-driven investments.
• Leveraging Kroger’s merchandising capabilities and predictive, analytics-based decision-making.
• Growing next-generation consumer brands that can offer Kroger’s huge customer base greater choice, convenience and innovation.
• Exploiting Lindsay Goldberg’s deep consumer expertise and rich experience in investing and supporting family-owned and founder-led companies.

What is Kroger’s Alternative Profit Stream Portfolio? Kroger, through its “Restock Kroger” program, plans to generate $400 million in incremental operating profit by 2020 by focusing on the growth of alternative revenue streams. With its traditional grocery business not expected to grow at a fast rate, Kroger is diversifying revenue streams through partnerships, media, consumer packaged goods (CPG) insights and Kroger Personal Finance. The main focus of alternative profit streams is to develop asset-light, high-margin businesses. Kroger looks to enhance its revenue streams by leveraging its scale, traffic and data-driven insights on its large consumer database of more than 60 million households, and has built investment vehicle PearlRock Partners to help emerging consumer brands grow their business. What Management Said About the New Partnership Stuart Aitken, Kroger’s Senior Vice President of Alternative Business and CEO of 84.51°, said:

We are excited to add PearlRock Partners to our portfolio of high-growth alternative profit businesses that generate additional value from our core grocery business. We are confident this partnership with Lindsay Goldberg will help discover and cultivate new brands that Kroger customers will love. We are transforming from grocer to growth company by deploying our assets to serve even more customers and create margin-rich alternative profit streams.

Brian Kelley, a Partner at Lindsay Goldberg who previously served as CEO of Keurig Green Mountain and President of Coca-Cola’s North American operations, added: 

We are thrilled to partner with Kroger to help grow tomorrow’s most successful consumer brands alongside the entrepreneurs who built them. Backed by a state-of-the-art predictive data platform, real-world consumer product expertise and unparalleled merchandising resources, these next-gen brands will be poised for growth and offer Kroger’s broad customer base greater choice, convenience and innovation.

Chris Laitala, a Partner at Lindsay Goldberg, commented:

Our partnership with Kroger creates an opportunity to invest in the consumer products industry with unique insights and a competitive edge. Consistent with our track record of making transformative investments with exceptional industry partners, this strategic relationship with Kroger will provide differentiated sourcing and visibility into evolving consumer preferences and brand performance.

Consumer Brand Industry: Small Players Outgrowing Larger Ones Small and extra-small consumer brands are growing sales at a much faster pace than bigger players. CPG industry sales have shifted from big to small brands over the past five years. According to a study conducted by market research firm IRI in October 2018, extra-small brands (generating annual sales of less than $100 million) saw sales rise 4.9% in 2018, making them the fastest-growing CPG segment. In comparison, large players (with sales of more than $5.5 billion) grew sales by only 0.6% in 2018.  In total, more than $17 billion of industry sales have shifted from large companies to smaller brands since 2013. Extra-small and small consumer brands grew their store sales at a CAGR of 4.3% and 3.6%, respectively, between 2013 and 2017. By in comparison, large players grew store sales at CAGR of 1.1% during the same period. [caption id="attachment_87944" align="aligncenter" width="664"] *“Latest 52 weeks” ended on October 2018
Source: IRI[/caption]   Lindsay Goldberg Company Overview Lindsay Goldberg is a private investment firm that is mainly aimed at partnering with families, founders and management teams and help them build their businesses. The company was founded in 2001 and follows a strategic, relationship-driven approach centered upon a collaborative investment model. The company banks on its global network of affiliate partners.