By Jack Hough
Around two decades ago, a Dutch television journalist named Teun van de Keuken ate 12 chocolate bars and demanded to be put in jail. His crime, he said, was financing slavery and child labor. Big chocolate brands had pledged years earlier to stop using cocoa beans grown by children, but they hadn't, Van de Keuken found while reporting in West Africa. When a judge declined to punish him, Van de Keuken did something truly extreme -- he started a chocolate company.
It turns out that I've been seeing those chocolate bars near the checkout at my little grocer. Never tried them -- they're as big as something Moses might have carried down from Mount Sinai, and I'm trying to keep my insulin indiscretions more snack-size. Brashly colored wrappers say "Tony's Chocolonely" in jumbo, erratic lettering. Then the name came up this week in a J.P. Morgan analysis on how food upstarts are taking market share from big brands.
Tony, if you're wondering, is an English-language nickname for Van de Keuken's first name, and lonely, the company says, refers to his early crusade against industry exploitation. The bars break into odd shapes and sizes to symbolize inequality in... well, there's a lot of back story.
If Van de Keuken is still looking for someone to pass judgment, I declare him guilty of selling majority ownership too soon, to a Dutch businessman in 2011. Revenue since then has exploded from $1 million euros a year to over 200 million euros ($215 million). The growth rate, recently 33%, has been accelerating. Last year, Walmart and Kroger added the brand.
Are you familiar with Poppi soda? That one appeared in my fridge a couple of weeks ago, so I tried it. It tasted like someone used an eye dropper while I wasn't looking to put vinegar in my soda -- not a lot, just enough to make me question whether something was off and take another sip to be sure. It turns out that the vinegar taste is coming from vinegar. If it's a prank, it's a highly specific kind of one called a prebiotic. PepsiCo just agreed to buy Poppi for close to $2 billion. The equity holders at Tony's must be dreaming of choco-lofty valuations.
Consumers have developed a taste for challenger brands. Bain & Co. found recently that food insurgents are generating 27% of industry growth using brands that collectively hold less than 1% market share. I wrote recently that Big Food is struggling, whether from obesity drugs or stretched consumer budgets. JPM finds that private label goods are taking market share in 61% of food categories as customers trade down. Small brands might be an even bigger concern. Those are taking market share in 67% of categories. Big publicly traded food companies have been losing share for two years, and the pace is accelerating.
Tony's is still tiny, at 0.6% share in chocolate, versus close to 37% for Hershey and 26% for Mars. You might have seen television commercials from farmer-owned Tillamook County Creamery Association in Oregon, including a Super Bowl spot two years ago. It's up to 3.6% market share in cheese, making it half the size of Sargento and one-third that of Kraft Heinz. Black Rifle Coffee, which "serves coffee and culture to people who love America," and whose roasts include Silencer Smooth and AK-47 Espresso, has taken 1.9% share in coffee pods, more than Starbucks, if still well behind giants like Nestlé and Keurig Dr Pepper, at about 19% apiece.
Conagra Brands with its Marie Callender's, Banquet, and Hungry Man brands, and dominant 36% share, has to be eyeing family-owned Amy's Kitchen, whose share is 4.7% and growing, with hits like pad thai, enchiladas, and macaroni and cheese.
Prefer boxed mac and cheese? Kraft Heinz controls half of that category. If you haven't heard of Goodles, from Gooder Foods, it's because it's only about three years old. Varieties include Shell We Dance and Ched Over Heels. Revenue doubled last year and hit a run-rate of more than $100 million a year by fall. Market share over the past 13 weeks reached 2.2%. There are many more examples, including Chomps meat sticks, Lesser Evil popcorn, Barebells protein bars, and Traditional Medicinals tea.
I'm not much of a story-driven consumer. I've used Ivory soap since I was a kid, based on an 1895 slogan that says it's 99.44% pure. Close enough, I figure. I assume the other 0.56% isn't radium or rhino horns, or I would have heard. But clearly, many consumers are skipping over established brands for stories about health, values, or just smallness. That could mean more market share losses for Big Food, or pricey dealmaking -- one more reason for investor caution.
Speaking of upstarts, privately held California yogawear brand Alo, founded in 2007, is nine years younger than Canada's Lululemon. Revenue is rising quickly -- I recently saw a parody headline about a town banning Alo clothes because its children could no longer tell their moms apart at soccer pickup.
This past Thursday, Lulu reported mixed fourth quarter financial results and guided below earnings estimates. Jefferies analyst Randal Konik is bearish on the company. Rising competition from Alo and others is one reason. Mission creep far beyond yoga wear is another -- the stores, he says, have begun to resemble Gap. Logos are growing larger, which plays to young, fickle buyers but risks turning off older, wealthier ones. "What we're finding is a company that's reached a tipping point where the growth is harder to come by," says Konik. His price target is $220, versus a recent $341.
Write to Jack Hough at jack.hough@barrons.com. Follow him on X and subscribe to his Barron's Streetwise podcast.
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(END) Dow Jones Newswires
March 28, 2025 21:30 ET (01:30 GMT)
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