Utz merges into the public market
The snack food company founded by the Utz family a century ago combined with publicly traded Collier Creek Holdings and began trading on the New York Stock Exchange.
It seemed as if wedding bells were about to ring.
The love story circulating in 2015 was that the famed, folksy investor Warren Buffett was discussing a possible union with family-owned snack food company Utz Quality Foods of Hanover, Pa. These rumors arose after The Oracle of Omaha told Fortune magazine that his meals sometimes consisted of Utz Potato Stix and a Coca-Cola. Buffett, chairman and CEO of Berkshire Hathaway holding company, is famous for buying companies whose products he loves.
The purported engagement was a just fairytale. Buffett told Fortune soon after that he had contemplated buying Utz, but “it never went anywhere.”
Now, Utz has made a different kind of marriage, after years of gobbling up other well-known snack companies. In August, Utz merged with publicly traded Collier Creek Holdings, a special-purpose acquisition company (SPAC), to form Utz Brands Inc. in a deal valued at $1.56 billion. Utz Brands began trading on the New York Stock Exchange at the end of August.
Utz CEO Dylan Lissette, wearing a red face mask emblazoned with the “Little Utz Girl” trademark, rang the opening bell on the NYSE on August 31.
“We have finally reached the level of critical mass where we had presence across the United States in every geographic region, but relatively low penetration in markets west of the Mississippi,” says Lissette’s father-in-law, Michael Rice, the 77-year-old, third-generation former chairman and CEO. “So there is still tremendous potential for domestic growth.
“To cultivate and harvest that potential at new levels required more capital, which we were able to [obtain] by joining Collier Creek and becoming a public company. They had the experience and wherewithal to help take us to new levels and enable us to better fulfill that potential.”
The Rice and Lissette families still maintain more than 50% ownership of the company’s outstanding shares, says Lissette, 49, CEO of Utz since 2013. The legacy owners of Utz sold only a small percentage of their equity, less than 10%.
“We believe in the future of the company to such a great extent that we made the migration to a public company so as to continue to put the company in the best position for future growth,” Lissette says.
Utz shareholders were “aligned” about a combination with Collier Creek, Lissette says. Based on 2019 retail sales, Utz was the largest U.S. family-owned producer of branded salty snacks, according to documents filed with the Securities & Exchange Commission.
“Over the last 10 years we had done a significant amount of M&A as we attempted to build out the company to a more national company, expanding our geographic reach as well as our brand portfolio,” Lissette says.
Lissette will continue to lead the company, and the headquarters will remain in Hanover. Lissette and the other family owners, as the largest shareholders, “should ensure continuity as we transition to the public markets and execute our long-term growth strategy,” the proxy-prospectus says.
What the proxy-prospectus refers to as Utz’s “power brands” are the heritage Utz brand; craft brands such as Zapp’s, Golden Flake Pork Skins and Hawaiian; “better for you” brands such as Good Health and Boulder Canyon; and selected licensed brands such as TGI Fridays and Herdez. Listed as “foundation brands” are regional brands Bachman, Golden Flake Potato Chips and Cheese Snacks, Tim’s Cascade Snacks, Snyder of Berlin and “Dirty” Potato Chips, as well as partner and private-label brands.
Utz’s products can be found in approximately 40% of U.S. households. The company operates 14 manufacturing facilities, and its products are distributed nationally to grocery stores, mass retailers, convenience and drug stores and other outlets.
“I think Grandma and Grandpa Utz would be very surprised as to how far we have come,” Rice says.
From kitchen to major competitor
In 1921, Bill and Salie Utz scraped together $300 to buy a small hand-operated potato chip cooker, peeler and slicer. The entrepreneurial couple began making potato chips in their kitchen in downtown Hanover.
Although friends said Bill was crazy to leave his job at a Hanover shoe factory making $5 a week “for this potato chip thing,” Rice says his grandparents were able to make a decent living from the start.
“Salie cooked the chips and Bill sold them door-to-door,” Rice says.
Later, they set up potato chip stands in farmers’ markets in Hanover, York, Harrisburg and Lancaster, Pa., then branched into stands in Baltimore and Washington. “They obviously had to work hard and mind their pennies, but the company grew slowly, albeit steadily,” Rice says.
Utz Brands is now the fourth-largest U.S. salty snack maker with gross sales of more than $1 billion annually. The company has grown its pro forma net sales at an 8% compound annual growth rate since 2001, or approximately 4% excluding acquisitions, according to SEC filings.
“Over the intervening years, from 1968 until today, we have never had a year when sales did not exceed the prior year, and where we did not make a profit. Some of our strongest years of growth were during the economic downturns,” Rice says.
Still, the Utz of the 21st century has had challenges. A proposed merger with pretzel maker Snyder’s of Hanover in 2009 was shelved after the first and second filings with the Federal Trade Commission failed to receive clearance. Then-CEO Rice said participating in another FTC request would put a strain on the company by distracting it from its core business.
Lissette is philosophical about that scuttled purchase. “I’ve always thought, if you live your life looking in the rear-view mirror, you are going to crash,” he says. “That could have been an incredible combination if it occurred; or it could not have been.”
Snyder’s of Hanover quickly rebounded with a 2010 merger with Lance Inc. That combined company, Snyder’s-Lance Inc., was acquired by Campbell Soup Co. in 2018 for $6.1 billion and today is the country’s second-largest salty-snack maker, behind PepsiCo’s Frito-Lay division.
After the failed Snyder’s merger, Utz went on a shopping spree. Over the past 10 fiscal years, it made 11 acquisitions and took on debt. The merger with Collier Creek allowed Utz to reduce its indebtedness, according to SEC documents.
But Rice, who has competed for years against small and major players, continues to think big.
“I believe our next 10 years can go way beyond the level we attained in the last 100 years,” he says. “These are very exciting times ahead of us.”
Collier Creek Holdings brings some seasoned human capital to Utz.
Collier Creek is a so-called blank check company that goes public and then acquires a privately held business, enabling it to become public without an IPO. The company was incorporated for the purpose of effecting a merger, according to filings with the SEC. Sponsored by Collier Creek Partners LLC, the SPAC completed its IPO in 2018, raising $440 million.
Talks with Utz began in 2019.
Collier Creek was co-founded by Roger Deromedi, former CEO of Kraft Foods Inc. Deromedi left Kraft in 2006 after serving there for 29 years. He then spent 11 years as chairman of Pinnacle Foods.
The other founders of Collier Creek are Chinh E. Chu, founder and managing partner of CC Capital Management LLC, and Jason K. Giordano, senior managing director of CC Capital Management.
Deromedi is now chairman of the Utz board. “My role as chairman is to support Dylan and his management team, and to help them to make the company even more successful,” Deromedi says.
“My experience and Dylan’s deep expertise in the snack food category is a powerful combination to take Utz Brands into its next 100 years.” Plans call for accelerating growth through marketing and product innovation and further geographic expansion, among other strategies, he says.
The reconstituted board has a majority of independent directors from multiple industries. The new directors have decades of experience in managing and growing companies, Lissette says. There are now 10 board members, including Deromedi, Lissette, Rice and Giordano, a former director of Pinnacle Foods and former managing director of The Blackstone Group.
“We have a great board, made up of legacy Utz shareholders and outside independent directors, some of which were from Collier,” Lissette says.
“We believe [it] will only make us stronger as an organization going forward.”
Lissette says Utz has always been run “in a very ‘public’ way.”
Still, corporate governance at Utz, as a publicly held company, will be very different than it was as a private family business, says Jennifer Pendergast, a professor of family enterprise and executive director of the John L. Ward Center for Family Enterprises at Northwestern University’s Kellogg School of Management.
“The family has given up their ability to control capital allocation,” she says. “Things like dividend levels will be controlled by the board.” Decisions about the company’s 3,000 employees could also be affected.
The family’s role in the new company most likely won’t be publicly known for a few years, Pendergast says. There’s no guarantee that family members will hold onto all their shares, she notes.
“As a family, you can look at the business as an heirloom on one end of the spectrum or as an investment. When going public, the family gives up some control to treat it as an heirloom and moves towards the ‘investors’ end of the spectrum.”
The Utz family heritage
Deromedi apparently thinks highly of how the family has managed the company.
“For Utz to be here after 100 years — becoming a billion-dollar company, going public and now continuing to grow — is a testament to what was achieved through the company’s rich heritage and core values,” he says.
The company seems to enjoy a place in the American consciousness as a family business. After all, one of its products is Grandma Utz’s Handcooked Potato Chips.
Besides the recognition from one of the world’s greatest investors, Utz was featured in an early episode of Mad Men. The cable TV series’ imaginary advertising agency, Sterling Cooper, handled the Utz account. When the fictitious owners of Utz — Hunt and Edith Schilling — showed up to watch the making of an Utz commercial, the couple appeared like sweet provincials. The fast-talking comedian hired to appear in the commercial lets loose a string of shock humor about Edith’s size. Lissette called the episode “fantastic” on CNBC’s Mad Money.
The company’s Little Utz Girl trademark celebrated the founders’ daughters, Arlene and Regina, and “represented all quintessential little girls,” according to Advertising Week 360, which celebrated the logo as a “Pop Icon.”
Arlene Utz married Francis X. Rice, a doctor’s son, in 1936. F.X. Rice joined his in-laws in the Hanover Potato Chip Company “to manage the business detail of the steadily growing operation,” Rice says. He credits his father with doing “a stellar job of maintaining a common bond as well as a strong operating base for the business in his 40-plus years of managing it.”
Rice says mealtime conversations at home featured discussions of what had happened at work that day. “I would say the dynamics of the business were totally woven into our family relationships,” he recalls.
Arlene Utz also worked in the business, beginning as a young girl. The story goes that when a market in downtown Hanover ran out of chips there was no one available to deliver more. Arlene put the chips in her red wagon and made the delivery herself, according to the Evening Sun in Hanover. She served as chairman of the Utz board for 23 years and was known as Arlene Utz Hollinger after she married for a second time. In her 2000 obituary, which was front-page news, the then Utz vice president of human resources praised Hollinger’s solid, consistent leadership and concern for the employees.
Rice continues to serve as a special adviser in addition to his roles as a director and chairman emeritus. He says he loved the business from his first job there in the autumn of 1954, when extra help was needed to store freshly harvested potato supplies in the cellars beneath the manufacturing facility. He was 11 years old.
“Dad asked me if I wanted to help unload the potatoes the local farmers were bringing in. Those potato supplies would be stored for the entire winter and into late April, when the new potato crop from Florida became available,” Rice says. “The storage operation ran from mid-August until the first freeze occurred in November that caused the potatoes to be unsuitable for producing the light-colored potato chips we wanted to produce.”
From then on, he worked every summer on the “utility crew,” unloading the freshly dug potatoes, cleaning route vans and doing building maintenance, to name a few jobs. It was a great education, he says.
“It gave me a tremendous knowledge of the basics of the business, how things could and should be done to be successful. I think it at least subconsciously inspired in me an appreciation of what it took to make an effective, successful business.”
When founder William Utz died in 1968, Rice’s father asked him to join the business. Rice had graduated from law school and was working as a government contracts lawyer with Control Data Corp. in Washington.
“My ultimate goal by then was to sometime join the business, because I saw tremendous potential to expand the business outside of the very constricted geographic area it then covered.,” says Rice, who moved his family to Hanover.
In 1968, Utz was pulling in just over $5 million in sales and was among the top 10 businesses in Hanover. Rice and his father discussed what could be done to grow the business even faster.
“There were two answers. First, expand into a full line snack manufacturer and expand our geographic area of sales beyond the 100-mile radius from Hanover that we were then serving,” Rice says. “By the early 1970s, we had established distribution centers in Richmond, Va.; Laurel, Del.; and suburban Philadelphia. We also built a pretzel plant in Hanover as the first step in broadening our manufacturing base and product lines.”
Rice became Utz’s CEO in 1978 when his father, F.X., retired. He led the company until Lissette became CEO in 2013. Lissette became part of the Utz family in the early 1990s when he married Rice’s daughter, Stacie.
The company never stopped expanding geographically and now has manufacturing capability across the country.
Rice says his grandfather “was very hands-on and tended to want to keep things under his control and in check.
“But I realized early on that if you wanted to grow, you had to recruit good people and give them a degree of freedom that you can’t totally control. They won’t do everything the way you might do it, but they will do some things better. They will make some mistakes, just as you will, but if they learn from the mistakes, that is fine, and the business will do better and grow faster.
“We have been so successful over these 100 years because our people have been so conscientious, dedicated and loyal. Their efforts are critical to success, and so appreciated. It takes good performance at all levels of an organization to be continuously successful.”
Maureen Milford last wrote about single-family offices for Family Business Magazine.
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