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Building Brands with Edible Appeal

Via Middle Market Growth: Q&A with Hadley Mullin, Managing Director, TSG Consumer Partners

Private Equity at the Table

Q: What do you look for when evaluating a consumer food brand as a potential investment?

Hadley Mullin: TSG focuses on brands that deliver a strong value proposition to the consumer. And by value, I don’t necessarily mean the lowest price—often far from it. Consumers are more discriminating than ever when evaluating options and will often pay for brands that deliver attributes they’re looking for. Some of the most important trends we’ve observed are natural and better-for-you positioning; convenience and portability; and, increasingly, environmental sustainability. In addition, we look for brands that have a distinct reason for being. In order to compete with the larger consumer packaged goods companies, earlier-stage and middle-market food brands need to deliver something truly unique—be it a proprietary formulation that offers distinctive taste and functional benefits to consumers or patented technologies that other brands can’t replicate. Smaller, evolving brands can never outspend large companies’ advertising budgets, so they need to deliver best-in-class products with a defensible point of difference.

Q: What trends are you seeing around consumer tastes and preferences and how have they influenced your investment decisions?

HM: Consumers are savvier today about ingredients and nutrition and far more discerning about what constitutes healthy eating. Ten to 20 years ago, “healthy eating” largely meant a low-calorie and low-fat diet, while today it encompasses a much wider set of consumption choices. Food companies need to pay more attention than ever when formulating products. It’s not just a matter of producing palate pleasers or products that hit a certain calorie or fat count—products must deliver great taste and a host of other nutritional (and emotional) benefits. One important trend we’ve observed is a throwback to simplicity. Consumers want ingredient panels with words they understand (and can pronounce!), and they want to see “whole” foods over processed foods. We now see packaging that lets consumers view the actual product on the shelf (e.g., transparent wrappers) and more emphasis on raw ingredients and food imagery in marketing materials.

Q: How does TSG drive growth in the food brands it invests in?

HM: We often invest in companies with underdeveloped product portfolios and immature distribution. We work with these brands to extend their product lines into adjacent categories, building from key brand attributes established in the original product line. We also work to expand distribution. For instance, we may help a brand that has historically sold in the natural channel adapt its product line and sales and marketing strategy to move into mainstream mass-market retail channels. Finally, we seek to increase velocity per point of distribution by investing aggressively in awareness building, using both social media and traditional marketing channels to drive trial and retention.

Q: What strategies have you used to deal with rising food costs and the increasing market share claimed by private label products?

HM: Building best-in-class brand equity is the best defense against rising food costs and competition from private labels. Brands that have strong consumer loyalty can take more risks than weaker brands when it comes to passing along cost increases to consumers. And brands that have high awareness and high consumer esteem can more effectively compete against lower-priced private label alternatives.

Hadley Mullin is a managing director with San Francisco-based TSG Consumer Partners and a member of ACG Los Angeles and ACG San Francisco. TSG is a private equity group that makes $50 million-$300 million equity investments in branded consumer products, retail and services companies. Founded in 1987, TSG was one of the first equity funds to invest solely in established consumer product companies.

Hadley Mullin, personal communication (2014, September). THE ROUND: Q&A with Hadley Mullin. Middle Market Growth, pp. A19, A20.


TSG Consumer Partners, LLC is a leading investment firm with
approximately $5 billion of assets under management, focused
exclusively on the branded consumer sector. Since its founding
in 1987, TSG has been an active investor in the food, beverage,
restaurant, beauty, personal care, household and apparel & accessories,
and e-commerce sectors. Representative past and present partner
companies include Duckhorn Wine Company, vitaminwater, thinkThin,
popchips, Muscle Milk, Yard House, Stumptown, Pabst, Planet Fitness,
REVOLVE, PAIGE, Smashbox Cosmetics, Pureology, Sexy Hair, e.l.f. Cosmetics
and IT Cosmetics.


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