Food and agriculture-focused private investment firm Arable Capital has acquired Fresh Innovations California, a fruit processor, for an undisclosed sum.
Capital for the investment came from Arable Capital, the firm’s debut investment vehicle, which closed on $300 million last year after securing a single investment from the Washington State Investment Board.
Alpine Pacific Capital, a fundless sponsor, introduced Oxnard, California-based Fresh Innovations to Arable and participated in the deal as a minority investor, according to Arable Capital managing director Greg Richards.
Richards told Agri Investor the Fresh Innovations deal is not the first from the Arable Capital fund, though it is the first to be publicly announced. Richards declined to say how many deals have been completed from the vehicle.
Founded in 2001, Fresh Innovations provides sliced apples of both organic and conventional varieties. Its products are designed to stay fresh for up to 21 days from slicing and its customers include Costco, Disneyland and schools across the country.
Fresh Innovations founder and president Toby Cohen said Arable’s commitment to growth was part of what attracted the company to work the firm and Richards added that Michigan and New York are attractive regions for potential expansion.
“Everything east of where we are now is attractive,” said Bellevue, Washington-based Richards. “You have to figure out that tricky balance between how close can I be to my supply and also get it to the customer in an expedited fashion that allows it to still be fresh.”
The investment in Fresh Innovations reflects the strategy of Arable’s fund, which focuses on investments in midstream assets related to the specialty crop and tree fruit industries with long-term hold periods.
“I’m not saying we’re going to hold everything for 15 years and then sell it all. Most likely, we’ll hold them longer, but there will be some that are shorter,” Richards said.
Sliced apple demand is driven by consumers’ desire for convenient and healthy snacking options, according to Richards, who added that the preference for sliced over whole apples does not only apply to children.
“If you are sitting in a meeting and there is a bowl of apples on the table, nobody’s probably going to eat one. But if there’s a bowl of sliced apples, everyone’s going to take a few slices,” said Richards.
He added baby carrots display similar consumption patterns and that Arable is currently examining what other crops might see increased consumption from being sliced.
Michael Butler, chief executive of Seattle-headquartered food and agribusiness-focused investment bank Cascadia Capital, told Agri Investor that pears are thought to have some potential to be sliced and packaged similarly to apples.
Thus far, he said, challenges to those efforts have been presented by fact that pears come in a wider variety of shapes and sizes than apples and ripen very differently. Efforts are underway, according to Butler, to address ripening issues related to pears through the use of ripening agents, though the development of different pear varieties through genetic engineering remains “way, way, way, behind” that of apples.
“People are looking at other fruits such as pears and saying ‘Hey, can we do the same thing with pears that we are doing with sliced apples?’ because sliced apples is growing the overall apple market,” Butler said.