Grain-free tortilla startup Siete raises $90M from Stripes Group

(source)

Dive Brief:

  • Siete Family Foods, a Mexican-American family-owned brand, recently accepted a round of outside funding to the tune of $90 million from Stripes Group, according to NOSH. The company makes grain-free tortillas, chips fried in avocado oil, and plant-based and dairy-free dips. 
  • Stripes is the brand’s first institutional investor. CEO Miguel Garza told NOSH that it will also likely be the brand’s last round of outside funding.
  • Discussions with the Stripes Group reportedly began two years ago, but in that time, Siete went from rapid organic growth to wanting to scale to a billion-dollar company, NOSH reported. The Stripes Group has also helped scale GrubHub/Seamless, Blue Apron and Califia Farms.

Dive Insight:

Siete Family Foods is yet another example of a successful Austin-based startup that has done well enough on its own to take its brand to the big leagues — and Siete has a big goal. The family-owned brand is looking to be a billion-dollar company, and it could achieve that since its products hit on the latest trends.

Its partnership with Stripes Group seems like a natural match. The investor has taken a stake and helped scale an impressive menu of founder-led companies by taking an active role in digital strategy, marketing, team-building and product innovation. As part of the funding deal, Stripes will take an active role on the board. VC partner Karen Kenworthy will be joining Siete’s board as a director, and Stripes partner Chris Carey will be an observer.

Instead of increasing its product offerings, Siete plans to use the money to invest heavily in staffing, innovation, sales and marketing. The company already has 19 SKUs across four categories, but entering new markets will allow the company to grow with the products that have already proved to be popular. Having a solid product portfolio will allow them to test the waters of new markets without taking on the risk of having to trial new products until they are more firmly established as a national brand. Plus, the company’s previous rapid growth allowed them to release 14 new offerings last year — plenty of options for them to sell to a larger audience. Before receiving any additional funding this year, the company’s grain-free products were already sold nationwide across 4,000 supermarkets.

It makes sense for Siete to partner with the Stripes Group to scale up production, but why would this private equity firm invest $90 million in the brand? The answer may be found in its products’ positioning. Americans increasingly love Mexican food, and Siete is the first of its kind to be commercially producing grain-free tortillas and tortilla chips that fuse Mexican flavor with better-for-you alternatives.

Although a quick online search shows that recipes for the products abound on food blogs, having a commercially available equivalent was an opportunity that Siete pounced on. Made with cassava, cashews, coconut and chia flour, this product appeals to not just those who have allergies, but customers on the popular gluten-free, paleo, ketogenic and free-from lifestyles, as well as those those who are just interested in better-for-you products. According to SPINS data, cassava flour sales grew 471.5% from 2016 to 2017. Bean and lentil flour sales also saw rapid growth, with a 9.8% increase in that time.

As more companies have developed free-from foods and ingredients to accommodate the growing consumer demand, Siete could take advantage of the market. Although the company has big plans for growth, Garza previously told NOSH that the brand wants to appear to be a “cute, family-owned paleo brand” to allow consumers to feel a sense of intimacy that makes brands relatable and keeps them coming back for more. 

Siete’s success has shown that there is a wide-open field for CPG companies to go out and reap what they sow. Although smaller, there are quite a few companies catering to this particular segment. Nolita’s Cauli-bites, Cece’s Veggie Company, Wunder Nuggets and Artisan Tropic are a few examples of smaller brands with growing grain-free products that have made waves for supermarkets and consumers across the nation. If Siete’s expansion is a success, other grain-free companies may shortly follow suit.

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