All Access

Retail Deals

Standard

Retail Deals Alerts

Alert

Retail Deals Thought Bubble

Thought Bubble

mustard

BFD Expert Voices - Retail Deals

BFD Expert Voices

The Silicon Valley Bank fallout may not hurt consumer-facing companies immediately, but is likely to have longer-term consequences, industry sources tell Richard.

Why it matters: While the U.S. government has assured SVB depositors of access to their funds, the accessibility of credit lines is less clear — and consumer-facing companies rely more on revolving credit facilities to finance operations than other industries.

What they're saying: On the sidelines of UBS Global's consumer and retail conference yesterday, Rhône Group principal Patrick Wilson said his firm is looking at portfolio companies' availability on credit lines.

SVB also highlights the problem of rising interest rates, says James Gellert, CEO of financial analytic firm RapidRatings.

"What SVB did was focus people’s attention on the fact there is dislocation in the credit and capital markets that come from interest rates and inflation," he says.

Context: The fallout's impact on small- to midsized companies and banks could yield distressed situations, says Gellert.

CEO of Hilco Corporate Finance Geoffrey Frankel agrees, adding that some purely digital commerce or retail tech companies may have some exposure

Note that Fetch was one such company that had money deposited with SVB.

The intrigue: The question is whether SVB is the "canary in the coal mine" for other industries, including consumer and retail, Frankel says.

There are relatively few financial institutions concentrated in the retail and CPG industries, he says.

"If this is just the first of wave, however, because of unhedged interest rate exposure, it's a different story," Frankel says.

Meanwhile, "General economic conditions could create availability problems," Frankel says.

Other forms of financing may gain in popularity to fill the void for companies in need of credit, he says.

Hilco, for example, is increasingly advising on and providing credit backed by the value of brand names, a valuable asset often underutilized when it comes to financing, Frankel says.

What we're watching: SVB's impact on alternative credit providers offering credit lines secured by non-traditional or more exotic kinds of assets outside of inventory and receivables.

The big picture: There's nothing like an old-fashioned banking crisis — or the fear of one — to convince consumers to snap their wallets shut.

1 big thing: SVB's shadow over retail and consumer

Illustration of an upward trending line on a chart as a percent sign

Saffron Road, the Stamford, Conn.-based maker of frozen international cuisine, aims to raise funds within the next year to invest in product expansion, its CEO Adnan Durrani tells Richard exclusively.

Why it's the BFD: Following a pandemic boost, the frozen meal category is expected to continue to grow, particularly products that embrace global flavors and healthier ingredients.

Ready-to-eat foods were cited by a number of CPG food companies as an area of focus at the Consumer Analyst Group of New York conference held in February.

Of note: Durrani spoke to Axios from the sidelines of the Natural Products Expo West annual trade show being held last week in Anaheim, California.

By the numbers: Saffron Road has about $60 million in sales and 20% growth year over year.

A majority of the company is owned by private investors including deep-pocketed family offices located in Switzerland.

The executive did not disclose the expected size of the fundraise.

Details: Fresh capital would finance the launch of new cuisines, expansion of existing ones, and let Saffron Road add breakfast and appetizers to its line, Durrani says.

The brand is optimistic about its introduction of Moroccan-inspired meals, for example, and also sees an opportunity in Korean foods.

Saffron Road already offers cuisine from regions such as South India, such as Madras curry with meatballs.

The brand's products perform well with millennial consumers and the next target for the company is to improve its standing with Gen Z.

While the company has some shelf-stable items, such as sauces, the frozen business is core, Durrani adds.

Between the lines: Saffron Road is benefiting from what Durrani describes as wanderlust via new cuisine as consumers increasingly enjoy trying food from around the world.

As major CPG companies hunker down to focus on legacy products and flavors, he sees more whitespace opening up for his company in the ethnic aisle.

He pointed to data that says that one-third of U.S. households bought an extra freezer during the pandemic, which suggests the adoption of frozen foods will continue as a sustainable trend long term.

The intrigue: "In my 30 years, I never saw frozen overtake fresh, and frozen overtook fresh by 230% the last year,” Durrani says.

Catch up fast: While the 12-year-old brand’s roots are in halal, aimed at the American Muslim consumer, Saffron Road's business model has always been to scale into mainstream retailers.

The company has permission to expand into other cuisines tied to better-for-you meals that are clean label, Durrani says.

Flashback: In addition to being halal and non-GMO certified, Saffron Road was the first antibiotic-free frozen entree in Whole Foods as well as the first Humanely Certified Entrée in the world.

The bottom line: The brand is at a point of critical mass and inflection, Durrani says.

2. The BFD: Saffron Road eyes fundraise this year

Photo: Donald Bowers/Getty Images for Editor Showcase

🐶 Freshpet, the maker of refrigerated pet food, is under fire from activist Jana Partners again, this time for its proposal to raise $350 million in convertible notes.

“This decision is the latest failure by Freshpet's board at a time when it could ill afford further damage to its credibility. We believe Freshpet requires either significant board change, or in the absence of such change, should be sold," Jana said in a statement.

It opposes the equity-linked capital raise given the stock is trading at less than 50% of its 52-week high and "a system crisis in the banking system."

📦 Zipline and Wing, two of the world's leading drone delivery companies, are ramping up their operations in preparation for wide-scale U.S. deployment starting next year, Axios’ Joann Muller reports.

This is a sign that the industry is maturing and could become more commonplace within a few years (should regulatory hurdles be cleared), Joann writes.

Using electric drones to deliver packages weighing as little as five pounds is expected to be faster, cheaper, and better for the planet than traditional gas guzzlers.

⛲️ Yardbird, Best Buy’s online outdoor furniture company, plans to open 11 new standalone showrooms across the U.S.

Yardbird, which Best Buy acquired in 2021, already has 14 showrooms across the country.

3. Retail therapy

Illustration of a brain in a shopping cart.

• Verity, a Zurich-based autonomous indoor drone provider for warehouses, has raised $32m in Series B funding led by A.P. Moller Holding, with Exor Ventures participating. https://axios.link/3ZXtyB9

• Alimentation Couche-Tard (TSX: ATD), the Canadian convenience store operator, will pay $3.3b to buy a portfolio of gas stations from French oil firm TotalEnergies (Paris: TTEF). https://axios.link/3Lte97b

• Abu Dhabi Investment Authority agreed to invest $500m into Indian omnichannel eyewear retailer Lenskart, via mix of primary and secondary capital. https://axios.link/3ZSgJYN

• Manna Drone Delivery, a B2B drone delivery company, has received a strategic investment from Coca-Cola's strategic bottling company Coca-Cola HBC through its ventures arm. https://www.coca-colahellenic.com/

• Charoen Pokphand Group is considering an IPO for its seed and animal feed business in Thailand, which could raise more than $1b, per Bloomberg. https://axios.link/3yKC3Dy

• Thai Beverage is considering an IPO for its spirits business, per Bloomberg. https://axios.link/3ZTUzFz

4. Retail transactions

• Home Depot has named Billy Bastek as its new executive vice president of merchandising, effective immediately. https://axios.link/42sSzpE

• AMIRI, the men’s and women’s ready-to-wear brand, has named Burberry’s Adrian Ward-Rees as its CEO, starting April 1, succeeding founder and CEO Mike Amiri. https://axios.link/3n0S2e3

• Green Coffee Company has named Treehouse Foods CEO Steve Oakland to its board. https://gcc-coffee.com/

• LVMH plans to name Laurent Mignon, the group CEO of investment firm Wendel, to the French luxury conglomerate’s board. https://axios.link/3Jpq1Eu

5. It's Personnel 

✨ Kim is back from India and back in the grind.

📢 Situational awareness: Join Axios business editor Dan Primack and senior deals editor George Moriarty Friday at 1pm ET for a subscriber-exclusive conversation on the state of the SVB fallout and what happens next. Register

🛍 What we're shopping: If Delhi, India, is a stop for you, Kim would recommend getting silk scarves and shawls wholesale from Nalli and Ahujasons. 

🙏 Thanks to newsletter editor Claire Rychlewski and copy editor Mickey Meece for today's edits.

March 16, 2023

1 big thing: SVB's shadow over retail and consumer