456 Montgomery Street
San Francisco, California 94104
Telephone: (415) 982-3019
Fax: (415) 982-3023
Incorporated:1996 as Aurora Foods Holdings Inc.
Sales: $789.2 million (1998)
Stock Exchanges: New York
Ticker Symbol: AOR
NAIC: 42242 Packaged Frozen Food Wholesalers; 42249 Other Grocery and Related Products Wholesalers
We aspire to be the leader in restoring and revitalizing well-known packaged food brands. As part of this mission we aim to: Build long term shareholder value; Develop and energize our employees; Form partnerships with our suppliers and customers; Exceed consumer expectations.
Aurora Foods Inc. produces and markets branded food products that have already been developed and established by other companies. These products have generally been in existence for some time and have achieved strong name recognition and good market position, but have been designated as non-core lines by their previous owners. Aurora's brands fall into two main categories: dry grocery and frozen foods. Through its dry grocery division, the company markets Duncan Hines baking mix products and Mrs. Butterworth's and Log Cabin syrup products. Its frozen foods division includes Van de Kamp's and Mrs. Paul's seafood products, Aunt Jemima frozen breakfast products, Celeste frozen pizzas, Chef's Choice frozen skillet meals, and Lender's Bagels. Aurora owns and operates its own frozen food manufacturing facilities, which are located in Jackson, Tennessee; Erie, Pennsylvania; and Yuba City, California. The company's dry grocery products, however, are produced by third-party manufacturing and packaging companies.
1995-97: Buying 'Orphan' Brands
Aurora Foods' portfolio of branded products began when a San Francisco-based investment firm organized a group of private investors to acquire the Van de Kamp's frozen seafood line from Pillsbury. The investment firm behind the deal--Dartford Partnership L.L.C.--was headed by Ian Wilson, a long-term veteran of the food and beverage industry. Wilson, whose earlier background included a stint as president of Coca-Cola's Pacific Group and as CEO of Dole Food Co., had been buying and selling grain-based food businesses for more than ten years. When he organized the Van de Kamp's purchase, he planned to use it as a starting point for further brand purchases. Wilson's goal was to purchase product lines that had good brand equity and market position but that had been designated as non-core by their owners and were therefore being undermarketed and undermanaged. He believed that by nurturing and developing these neglected, 'orphan' brands he could revitalize and grow them.
The Van de Kamp's line fit Wilson's profile of an 'orphan' brand perfectly. With a history dating back to 1915, it was a market leader in the frozen seafood business but had been designated by Pillsbury as a non-core brand. Receiving little attention or marketing from Pillsbury, the line's revenues were gradually diminishing. In September 1995, Dartford Partnership purchased the Van de Kamp's business for $190 million. In addition to the seafood products, the acquisition included a small frozen dessert line.
In May 1996, Wilson made another branded product acquisition, purchasing the Mrs. Paul's frozen seafood line from the Campbell Soup Company. Mrs. Paul's was added to Van de Kamp's, Inc., the company Dartford had formed to acquire the Van de Kamp's line. Two more product lines joined the growing portfolio in July: Aunt Jemima frozen breakfasts and Celeste frozen pizzas. Both businesses, which were acquired from the Quaker Oats Company, were suffering from declining sales when Aurora purchased them.
Meanwhile, Dartford Partnership was putting together another acquisition. In December 1996, Dartford and two other investment groups--Fenway Partners, Inc. and McCown De Leeuw & Co., Inc.--banded together to purchase the Mrs. Butterworth's brand of syrups and pancake mixes. Forming a holding company called Aurora Foods Holdings, the investors acquired the syrup business from Unilever United States, Inc. for a purchase price of $114.1 million. Just a few months later, Aurora Foods made its second acquisition, purchasing the Log Cabin brand of syrups from Kraft Foods, Inc. for $222 million. Together, Mrs. Butterworth's and Log Cabin held the top position in the syrup market, with a combined share of 34 percent.
Early 1998: Van de Kamp's and Aurora Foods Merge
Aurora Foods kicked off 1998 with its largest acquisition to date. In January, the company purchased the Duncan Hines line of baking mixes from Procter & Gamble for $445 million. Duncan Hines had a 26 percent market share in cake and cupcake mixes and annual sales of approximately $250 million, but no longer fit with Procter & Gamble's growth strategy. Aurora, which had 1997 sales of around $200 million, more than doubled its size with the Duncan Hines purchase.
Under the terms of the acquisition, Aurora purchased the Duncan Hines production equipment, which was located at a plant in Jackson, Tennessee. The company then signed a five-year outsourcing agreement with Gilster-Mary Lee Corporation for production of Duncan Hines products. Aurora estimated that this outsourcing would result in a cost savings of $12.4 million.
Although Aurora Foods and Van de Kamp's were both owned by the same investment firms and were both formed to acquire and market branded products, the investors' original plan had been to keep the two companies separate. In the spring of 1998, however, it was decided that they should join forces in order to benefit from economies of scale. The newly formed company, Aurora Foods, Inc., was headquartered in San Francisco and had almost $1 billion in sales. Its chairman and CEO was Ian Wilson. Three other Dartford partners joined Wilson as vice-chairman, executive vice-president, and CFO of the newly formed company. A few months after the merger was complete, in June 1998, Aurora went public in an initial offering of 14.5 million shares priced at $21 each.
While Aurora worked to merge its operations and positioned itself for further growth, it simultaneously worked to revitalize its existing brands. The company's strategy for doing so was straightforward and formulaic. It consisted of reducing operating costs and then investing the operating savings in marketing programs and product innovation.
The cost reduction side of the formula was achieved largely by consolidation of operations, outsourcing, and maintaining an extremely low administrative overhead. For example, Aurora combined and streamlined its frozen seafood business by moving the Mrs. Paul's operation into the Van de Kamp's facilities. It cut costs by outsourcing the production of its Log Cabin and Mrs. Butterworth's syrups and Duncan Hines mixes. It also maintained an unusually small corporate staff, aggressively cutting out administrative redundancies. The results of the company's expense trimming added up to an annual savings of approximately $66 million and resulted in a lower cost of goods sold, and a higher gross profit margin.
The savings Aurora realized from its cost-reduction measures were poured into reinvigorating and marketing its brands. Wilson explained the company's strategy in a 1998 interview with Milling & Baking News. 'In being non-core, none of these brands has had anything done to it,' he said, adding 'The attention has gone elsewhere. There's no new products, there's no new packaging, there's no media spending. The product gets managed for cash flow, and the first thing that gets taken away is the media spending and the consumer advertising. We add that back in, and take the brand back up to where it was before.'
Aurora's first step toward breathing new life into its brands was to refocus consumers' attention on them. The company invested heavily in this effort, spending between 23 and 30 percent of its total sales on marketing and advertising as opposed to the industry average of 20 to 25 percent. This level of marketing was a substantial increase for all of Aurora's brands; for example, Duncan Hines' consumer advertising immediately doubled when it became an Aurora brand.
The development of new advertising campaigns was an important part of Aurora's marketing expense. In 1998, the company aired television advertising for its Log Cabin brand for the first time in five years, using a newly created slogan: 'In the heart of every home, there's a little Log Cabin.' Aurora also launched a new print and television ad campaign for Duncan Hines, featuring the tagline 'You're why I bake a Duncan Hines cake.' Aunt Jemima's, too, got new exposure through a series of print ads and television spots geared to kids on the popular Nickelodeon TV network.
Aurora did not rely solely on a beefed-up ad budget to boost sales. A second key component of the strategy was the introduction of new products. From its formation in 1995 to the middle of 1998, the company introduced more than 20 new products that built on its existing branded lines. The majority of the new products were premium seafood items rolled out under the Van de Kamp's and Mrs. Paul's names--such as teriyaki tuna, grilled lemon pepper and herb fish fillets, and salmon with dill sauce. Aurora also expanded the Celeste pizza line by adding the Mama Celeste Fresh Baked Rising Crust pizza in November 1997.
In addition to adding completely new products to its lines, Aurora reformulated several of its existing products, to make them more appealing to consumers. In 1998, the company reformulated its Duncan Hines brownie mixes to incorporate better chocolate flavoring systems. It also introduced a sugar-free version of its Log Cabin syrup. Aurora also developed new packaging for several of its brands. Aunt Jemima's packaging, which had been white, was redesigned in a bright red&mdashø make it stand out in the freezer case. The standard, generic Log Cabin syrup bottle was replaced with a container in the shape of a log cabin, making it automatically more identifiable. The company also began producing a gallon jug of Mrs. Butterworth's syrup specifically designed to appeal to club stores.
1995:Dartford Partnership organizes purchase of Van de Kamp's brand from Pillsbury.
1996:Van de Kamp's, Inc. acquires Mrs. Paul's, Aunt Jemima, and Celeste brands; Dartford Partnership and other investors form Aurora Foods Holdings Inc. to purchase Mrs. Butterworth's brand of syrups.
1997:Aurora Foods Holdings acquires Log Cabin brand of syrups.
1998:Aurora Foods Holdings acquires Duncan Hines brand; Van de Kamp's, Inc. and Aurora Foods Holdings merge to form Aurora Foods Inc.; newly formed Aurora Foods Inc. goes public.
1999:Aurora acquires Chef's Choice and Lender's Bagels brands.
Aurora's well-defined approach was proving successful. All of its brands had been on a downward trajectory when Aurora acquired them--and each one showed significantly improved sales growth within one year of acquisition. The most dramatic example of this was Celeste pizza. Prior to being acquired by Aurora, Celeste's sales had diminished by approximately 17 percent over two years. Under Aurora's management, however, the downward slide was reversed; Celeste's sales grew by 31 percent during the first two years after its acquisition. Sales of Mrs. Paul's, Aunt Jemima, and Duncan Hines products also showed notable improvement almost immediately.
1999 and Beyond
Having established a formula that worked, Aurora continued to employ it in 1999. In January and February, the company rolled out several new products--including Aunt Jemima mini-pancakes and french toast sticks, Van de Kamp's and Mrs. Paul's Seafood Tenders and Seafood Selects, and a series of Mrs. Butterworth's syrups in different flavors. Also in February, Aurora began airing new advertising campaigns for several of its brands.
In April 1999, Aurora made its first acquisition in more than a year, purchasing the Chef's Choice brand from Seattle-based Sea Coast Foods, Inc. for $50 million. Chef's Choice was a line of ten skillet meals&mdash-tire meals that could be prepared in a single skillet in under 15 minutes. Skillet meals were a rapidly growing segment of the grocery industry, with industrywide sales growing from $35 million in 1997 to $125 million in 1998. Chef's Choice itself had seen rapid growth; its sales had increased from $27 million in 1997 to $57 million in 1998.
Another acquisition followed a few months later. In September 1999, Aurora announced that it had agreed to purchase the Lender's Bagel line from Kellogg Company for $275 million. Lender's was an easy market leader, with a 77 percent share of the frozen bagel market and a 69 percent share of the refrigerated segment. The acquisition, which was completed in November, boosted Aurora's total sales by approximately $200 million.
Meanwhile, the company continued to improve and expand upon its existing products. Early in 1999, it unveiled new, vertical package designs for its entire Van de Kamp's and Mrs. Paul's lines. The new packages freed up shelf space, which was a benefit to retailers. Moreover, because no other frozen seafood brand had vertical packaging, the new design was easier for consumers to spot. Aurora also made some modifications to its Aunt Jemima waffles, giving them a new round shape and increasing the waffle count per box.
Aurora's goals for the future were ambitious. The company aimed for annual revenue growth of eight to ten percent and operating profit growth of more than 15 percent. To attain its goals, Aurora planned to continue keeping operating expenses low and marketing budgets high. More product line extensions, reformulations, and package redesigns were in the works. The company also planned to broaden its distribution to include more restaurants, club stores, and mass merchandisers.
Acquisition of new brands was another likely avenue of growth. In its 1998 annual report, Aurora indicated that it continued to seek new 'orphan' brands that met with its criteria--strong market position, good brand equity, and potential for growth.
Principal Divisions: Dry Grocery Division; Frozen Food Division.
Principal Competitors: Bestfoods; ConAgra, Inc.; The Earthgrains Company; General Mills, Inc.; Interstate Bakeries Corporation; Kellogg Company; Kraft Foods, Inc.; The Pillsbury Company; The Quaker Oats Company; Unilever PLC; Vlasic Foods International Inc.
Barron, Kelly, 'Brand Orphanage,' Forbes, November 15, 1999, p. 100.
Davidson, Gordon, 'Growing Orphan Brands at Aurora Foods,' Milling & Baking News, 1998.
Kennedy, Tony, 'Pillsbury Says It Has a Buyer for Van de Kamp's: Investors Would Pay $190 Million for Seafood Brand,' Minneapolis Star Tribune, July 13, 1995, p. 1D.
Much, Marilyn, 'Food Drive: Aurora Becomes Foster Parent to Familiar `Orphan' Brands,' Investor's Business Daily, January 14, 1999.
'Procter & Gamble Sells Duncan Hines Baking Mixes to Another Ohio Firm,' Minneapolis Star Tribune, December 9, 1997, p. 3D.
Source: International Directory of Company Histories, Vol. 32. St. James Press, 2000.