[Video] ‘The worst is behind us,’ Why 2024 might be a better year for private equity funding in food, beverage

With the debut fund, Forward Consumer Parterns is looking for food and beverage companies in a whitespace and which have a sustainable business, Leeds said.

“What we're looking for is the ability to take some of the whitespace that's left in [the consumer market]. As the larger investment firms who have been incredibly successful have scaled up, they’ve left some white space for people like us, for Forward, who can come in and partner with brands who are not these brand-new venture capital growth equity 300% growth style companies, that's not who we are, what we do. We're looking for assets that are and brands that are proven and enduring, powerful across not just years, but hopefully decades as well.”

How food, beverage companies can assess what type of funding is best for them

While the capital crunch of 2023 impacted a number of food and beverage company, 2024 may be a better environment for funding, as interest rates are set to decline and inflation slows, Leeds explained.

“From what I have observed, it feels like the worst is behind us from where the market has been. 2022 was a very challenging year with supply chain, inflation, out of stocks, and lingering effects of COVID and Omicron, and all of these ripples that just it felt like there was never a moment where you could get a clean 30-day look at just having a business and having a plan and operating. It was curveball after curveball, [but] ‘23 had still some curveballs but felt more manageable.”

As capital markets open up, food and beverage companies that are interested in funding need to evaluate their options and understand what might be the best fit for their business, whether that be more traditional commercial loans or a private equity partnership, Leeds said. While acknowledging it might not be right for every company, Leeds highlighted that private equity provides two things that can be helpful in scaling a business: capital and a partner.

“There's a lot of capital out there, and if you're a well-positioned brand, you can raise capital. I feel like people should expect more from their capital and aim a little higher than just you know dollars in the bank if that's what they want.”

Food and beverage startups looking for funding first need to focus internally and ensure that their team is fully built out, Leeds noted. Once the team is built, they need to really explore all their funding options before getting into a deal and understand what type of a partner the investor will be in good and bad time.

“Anybody can be a good partner when the business is going well, but what kind of partnership would this be when we miss a number, have consumer complaint, or recall, or we lose an account, or delisted somewhere, or we're running low on cash those kinds of situations? You need to be able to stress test those and there's a human judgment component of that, and then there's past experience and bought into that, which is references and understanding the kind of partners you're getting into a relationship with. When done right, it is a marriage. It is a long-term partnership.”