Utz And The (Public) Lure Of A Snack SPAC

In the consumer packaged goods space, snack SPACs are showing some teeth.

Special purpose acquisition companies – or SPACs, as they are more commonly known – have been fairly popular as of late on Wall Street.

As reported here last week, markets have been making new highs, and these “blank-check” vehicles have been logging billions of dollars in investments as they come to market through initial public offerings (IPOs). The SPACS then use their funding to buy private companies.

Recent examples include IPOs (or funding efforts to inch toward IPOs) by former U.S. House Speaker Paul Ryan and former high-level Trump adviser Gary Cohn. And the SPACs can be found across any number of verticals, such as space travel (where private Virgin Galactic merged with a blank-check company) and payments firm Paya.

It’s a journey toward going public that also now counts snack foods among the SPAC roster.

Meanwhile, private companies that have merged with SPACs include sports gambling giant DraftKings and billionaire Richard Branson’s spaceflight startup Virgin Galactic. And in the payments and financial sectors, Paya recently filed to merge with FinTech Acquisition Corp. III as a path to go public.

On Monday (Aug. 31), Utz Quality Foods went public on the NYSE, several weeks after SPAC Collier Creek Holdings said it would acquire the snack maker.

As of this writing, the stock is up double-digit percentage points to $18.23.

It may seem odd that a 99-year-old firm would see a cheer from Wall Street in an age when cars are making the leap to electric vehicles and online platforms are promising to do everything from link up users with video conferencing to getting them just about anything they want – in under an hour.

But some things are tried and true – and in the age of the pandemic, comfort food turns out to be one of them.

In an interview with Barrons, Utz CEO Dylan Lissette said the hypergrowth that marked the initial stages of lockdown “has abated somewhat, but we are still experiencing a very nice elevated demand cycle. And for the foreseeable future, we see that continuing, just because there is a structural change to some degree, where folks are definitely eating at home more.” He added that eCommerce is making inroads, growing at triple-digit percentage points.

Drilling down a bit, many know Utz as the maker of a range of snack foods, with brand names including Utz, Zappos and Good Health, spanning pretzels, potato chips and pork rinds. In the June announcement detailing the linkup between Collier Creek and Utz, the firms said the snack maker expects to see $932 million in net sales this year.

Investor presentations from Utz state that retail sales growth has been more than 4 percent through the past five years, and salty snacks have been growing at multiples of other retail offerings such as baked goods (around 2 percent). During the COVID and recession environments, first-half year-over-year net sales growth has topped 11 percent. eCommerce sales, which have the benefit of being direct-to-consumer, now stand at 2.9 percent of net sales as of the second quarter, where they had been 2 percent in the first quarter and 1.2 percent in all of 2019 – showing evidence of the great digital chip shift.

When it’s all over, we may sweat to get into our sweatpants – while firms banking on the munchies see tailwinds to their top lines.