Sovos Brands Goes Public on Nasdaq, Opening Above IPO Price at a $1.3 Billion Valuation

This is an English adaptation of a FoodBud historical article originally published on September 23, 2021.

Sovos Brands listed on Nasdaq on September 23, 2021, opening at $14.75 per share versus an IPO price of $12. The company was valued at $1.3 billion, and its shares rose more than 21% in early trading.

According to earlier SEC filings, Sovos Brands offered 23.334 million shares and could raise up to $373 million. J.P. Morgan and Goldman Sachs were among the underwriters.

A Brand-Building Platform for Food

CEO Todd Lachman founded Sovos Brands in 2017 after roughly 30 years in consumer packaged goods. His previous roles included global president of Mars Petcare, president of Mars Chocolate North America and Latin America, and executive vice president at Del Monte Foods.

Lachman’s thesis was to find and acquire food brands with distinctive characteristics, then accelerate them toward category leadership. Sovos Brands was positioned as both a food platform and a brand-growth accelerator.

Over five years, Sovos Brands acquired four brands:

• Rao’s, the pasta sauce brand
• Noosa, the yogurt brand
• Birch Benders, the pancake and waffle brand
• Michael Angelo’s, the Italian frozen-food brand

The company’s largest single product was Rao’s Homemade 24oz marinara. Sovos Brands also planned to keep using acquisitions to strengthen its position in food.

Rao’s and the Distribution Playbook

Rao’s originated from a New York restaurant known as one of the city’s hardest places to get a table. It entered packaged consumer products in 1991, but had not achieved major growth before Sovos Brands acquired it.

Lachman’s view was that repeat purchases in pasta sauce were not always driven by a product being objectively the best. More often, consumers bought what was widely available or looked good enough.

The core growth strategy for acquired brands was therefore aggressive expansion of retail distribution. Since Sovos Brands acquired Rao’s in 2017, Rao’s revenue had grown by more than 450%. After Sovos Brands acquired Birch Benders in October 2020, Birch Benders revenue grew by more than 15%.

Financial Profile

For the period ended June 26, 2021, Sovos Brands reported year-to-date revenue of $351 million, up 34.4% year over year.

Full-year revenue was $560 million in 2020, up 44.3% year over year, compared with $388 million in 2019.

The company had become profitable in 2020. For the period ended June 26, 2021, year-to-date net profit was $10.37 million. Full-year net profit was $10.83 million in 2020, compared with a net loss of $24.15 million in 2019.

As of June 26, 2021, Sovos Brands had $400 million in cash and cash equivalents, and total long-term debt of $790 million.

Before the IPO, Advent International held 84.7% of the company. After the IPO, Advent International’s stake was 62.2%.

Note: IPO, valuation, ownership, debt, revenue, profit, and forward-looking acquisition-plan figures are historical and refer to the 2021 source article.