Starco continues M&A spree with acquisition of Soylent
Santa Monica-based Starco Brands has made further inroads into the consumer goods market with the acquisition of meal replacement product developer Soylent, led by Chief Executive Demir Vangelov. The deal is Starco’s third acquisition in just six months.
As part of the transaction, Soylent shareholders will acquire shares in Starco Brands, which trades on the over-the-counter market and closed March 3 at 17 cents.
Ross Sklar, chief executive of Starco, which now controls about 83% of Starco’s stock, said his company viewed the acquisition almost as if it were a “technical game,” saying Starco relied on the development of the product and value proposition was impressed by Soylent.
Founded in 2013, Soylent is a low-sugar, high-protein, plant-based protein and meal replacement shake, powder and bar. A one-time purchase of a 12-pack of Soylent’s Chocolate Protein Shakes is $45, or $3.75 per bottle. Customers can also subscribe to delivery at lower prices or find them at retail stores like Walmart and Target.
Downtown Soylent has raised nearly $134 million in funding in seven rounds attended by investors including Google Ventures and Andreessen Horowitz. The $20 million Series A funding round took place in January 2015.
According to Vangelov in an interview with Food Navigator USA, the company’s early reliance on such financing diminished by 2021, when it had become operationally viable. Vangelov joined the company in 2020 and made several changes that included a restructuring of the management team and a cut in client acquisition spending. He also pulled Soylent out of the UK.
Praising Soylent’s journey as a growing company, Sklar said it has come a long way since its inception. “We are product people first, so we were very impressed with the development of their product and the company’s value proposition.”
“We’re pretty picky when it comes to (mergers and acquisitions) because on the other side of the ledger we’re growing our own intellectual property and curating brands around it,” Sklar continued, adding that the company is prioritizing what he’s doing means “whitespace” in the brands that Starco acquires and intends to grow.
Sklar defined “whitespace” as untapped markets that specific brands can reach through celebrity and influencer partnerships, brand extension, intellectual property development, and more.
Taking these initiatives, Sklar said, allows Starco to scale a brand in a short amount of time.
Starco’s portfolio includes products like Winona Pure popcorn spray, Skylar fragrances and Whipshots, a vodka-infused whipped cream promoted by Grammy Award-winning rapper Cardi B.
The acquisition of Soylent is Starco’s first foray into meal replacement products. However, there is some expertise that Sklar and his team bring to the new vertical.
Sklar noted that he and The Starco Groups, Starco Brands’ sister company that manufactures chemicals and serves retailers, give Starco an edge in manufacturing and related operations.
“We’ve been making chemicals for a very long time – and under the chemicals umbrella you’ll find food, beverages, personal care products, etc.,” Sklar said. “From a manufacturing perspective, technology, R&D, formulary, all of those things are right in the strike zone for us.”
Sklar’s manufacturing expertise will benefit Soylent, which in addition to growing its brand will also compete with others in a busy market.
In a 2022 meal replacement report by Polaris Market Research, the company estimated the global meal replacement market at $11.9 billion by 2021.
The report found that the Covid-19 pandemic had a positive impact on the market. “Demand for the industry has increased over the period due to increased consumer awareness of healthy eating,” the report said.
Caleb Bryant, deputy director of food and beverage reports at market research firm Mintel, identified meal replacement and food maker Huel as Soylent’s direct competitor. “Huel is really focused on that convenience aspect and being that all-in-one nutritional source,” he said.
Based in New York, Huel sells meal replacement drinks, protein bars, powders, and hot and savory ready meals. The Huel brand is also plant-based.
Founded in 2014, Huel closed a $24 million investment round in December with participation from venture capital firm Highland Europe and actor Idris Elba. Post-funding, Highland valued the company at $560 million.
Bryant said that while they’re not as similar to Soylent as Huel, companies like Koia, Urban Remedy and Happy Viking, co-founded by Venus Williams, pose some competition for Soylent.
“There are so many high-protein snack foods out there, so it’s just a lot of competition when you talk about nutritional drinks, and then there’s just a lot of innovation and plant-based (products) in general,” Bryant said. “Protein content is by far the most important attribute for consumers when purchasing a nutritional drink, so with many plant-based products it is important to find the balance to achieve the nutritional levels consumers want and expect, while also having a good product taste.”
Rising inflation could play a role in Soylent’s performance, according to Bryant, who said consumers are reconsidering and reprioritizing their purchases across all food and beverage categories. Consumers may find protein products like Soylent’s overpriced, he said.
Sklar acknowledged the litany of economic challenges affecting consumers and businesses alike, but expressed confidence in Starco’s work as a small company with a manufacturing background. He said Soylent has room to grow in terms of retail distribution and overall size.
“Our goal is to take this business to a level that will be viewed as a macro brand,” he said. “We believe we have a pretty good roadmap to get there, leveraging these markets with current products, new products and the help of some of our influencer and celebrity partners.”