�Craig Gi­ammona

No Nukes

Bloomberg Businessweek (North America) - - Focus O On/mid-market -

S Sales of the com­pany’s flag­ship prpro­duc prod­uct, which ac­count for al­most all of i its rev­enue, have surged 30 300 per­cent dur­ing the past twot years to fin­ish 2015 at $176.9 mil­lion, acco ac­cord­ing to data from m mar­ket re­searcher IRI. Euromon­i­tor In­ter­na­tion­al­ter­na­tional r ranks Skin­ny­pop fourth in the over­al­lveral pop­corn mar­ket—which in­cludes Orville Re­den­bacher’s from Cona­gra Foods and Pop Se­cret from Di­a­mond Foods— and No. 2 in the faster-grow­ing ready-to-eat seg­ment, where it trails only Smart­food, the long­time leader pro­duced by Pep­sico’s Frito-lay, the world’s largest snack com­pany. Skin­ny­pop and Smart­food are prof­it­ing as con­sumers move away from mi­crowave pop­corn, which now trails the ready-to-eat va­ri­ety.

Af­ter ac­quir­ing Skin­ny­pop, Am­plify ramped up mar­ket­ing and in­creased dis­tri­bu­tion with re­tail­ers look­ing to boost their healthy salty- snack of­fer­ings. En­nis also cred­its the brand’s suc­cess to new cook­ing tech­niques and pack­ag­ing in­no­va­tions that help pre­cooked pop­corn stay fresh on store shelves. It doesn’t hurt that the name Skin­ny­pop im­plies it’s a diet food with­out ex­plic­itly say­ing so. “Pop­corn got cleaned up,” says Kara Nielsen, a culi­nary-trend an­a­lyst for Ster­ling-rice Group, a brand­ing com­pany. Con­sumers were crav­ing an al­ter­na­tive to gi­ant tubes of flu­o­res­cent pop­corn fla­vored with fake but­ter and sweet, tooth-rot­ting caramel corn. “It went from be­ing an in­dul­gent treat to be­ing an every­day snack that isn’t bad for you,” she says.

Pop­corn’s still a rel­a­tively small piece of the U.S. salty-snack mar­ket, dwarfed by sales of potato and tor­tilla chips and nuts, ac­cord­ing to data from Euromon­i­tor. Over­all, pop­corn sales were about $2.9 bil­lion last year, com­pared with a com­bined $15.3 bil­lion for tor­tilla and potato chips. But pop­corn’s been the fastest­grow­ing salty snack each of the past three years, lead­ing more com­pa­nies to fo­cus on the cat­e­gory. Cona­gra, which makes two of the largest mi­crowave brands, joined forces with re­al­ity-tv star Bethenny Frankel in 2014 on a Skin­ny­girl brand, in a di­rect pitch at weight-con­scious fe­male con­sumers. An­nie’s Home­grown, an or­ganic la­bel owned by Gen­eral Mills that’s best known for its mac­a­roni and cheese, re­leased a pop­corn ear­lier this year; and Inven­ture Foods, the mak­ers of Boul­der Canyon potato chips, re­cently de­buted Real Thin Pop. Steve Sk­lar, who runs the snack di­vi­sion at Inven­ture, says his com­pany’s pop­corn has less fat than Skin­ny­pop. Real Thin Pop va­ri­eties are cooked in olive, co­conut, and av­o­cado oil. “Any­body can do a dif­fer­ent fla­vor,” he says, “but not ev­ery­body has the tech­nol­ogy to use dif­fer­ent oils.”

One rea­son com­pe­ti­tion is heat­ing up is that Skin­ny­pop has demon­strated that con­sumers will pay a pre­mium for clean pop­corn. At Walmart.com, a 12-pack of 4.4-oz. bags of Skin­ny­pop costs about $50, while a car­ton with twenty-five 1-oz. boxes of Cracker Jack, Cona­gra’s long-pop­u­lar caramel corn, can be had for $15.88.

En­nis says he isn’t overly con­cerned about the grow­ing num­ber of com­peti­tors. Angie’s Boom Chicka Pop and Pop­corn In­di­ana, two ri­vals bat­tling for clean-pop­corn con­sumers, had a com­bined $107.7 mil­lion in sales last year, while Am­plify’s were $183.9 mil­lion. The Texas com­pany also has a big head start on late-ar­riv­ing food gi­ants who might try to jump into the mar­ket. “The land grab is over,” En­nis says. Am­plify is ex­pand­ing be­yond pop­corn. On May 2, it an­nounced an agree­ment to buy Bound­less Nu­tri­tion, an Austin com­pany that makes snack bars and cook­ies and had sales of about $7 mil­lion last year. Am­plify also has its eyes on a big­ger piece of the salty-snack mar­ket, and it’s once again gunning for Fri­toLay. The com­pany started dis­tribut­ing its Paqui (rhymes with “hockey”) tor­tilla chips across the U.S. this year. The gluten-free, non-gmo chips are fla­vored with or­ganic ched­dar cheese. En­nis calls it a “bet­ter-for-you Dorito.”

U.S. pop­corn sales Mi­crowave Ready-to-eat Skin­ny­pop be­comes the No. 2 readyto-eat brand, af­ter Smart­food “Con­sumers love the sim­plic­ity of pop­corn. They want to know what they’re eat­ing.” —— CEO Tom En­nis, Am­plify Snack Brands The bot­tom line Sales of Am­plify Snack Brands’ Skin­ny­pop have grown 300 per­cent in the past two years, pro­pel­ling it to No. 4 in the pop­corn mar­ket.

Ill., pro­vides ad­min­is­tra­tive ser­vices in­clud­ing pay­roll, ac­count­ing, and IT to 750 den­tal prac­tices, “not a team of se­nior and ju­nior con­sul­tants” that could “cost sev­eral hun­dred thou­sand dol­lars a week.”

Mid­size com­pa­nies such as Heart­land, which has about $1.1 bil­lion in an­nual rev­enue, of­ten re­quire con­sult­ing help—on ev­ery­thing from dig­i­tal mar­ket­ing to ex­pand­ing over­seas—but they don’t want the teams that big con­sult­ing firms of­ten as­sign or the hefty ex­pense of hir­ing them. Many are turn­ing to com­pa­nies like Los An­ge­les-based BTG, which al­low them to choose from a range of in­de­pen­dent con­sul­tants, typ­i­cally for about onethird to one-half what a Big Three con­sult­ing firm would charge.

Founded nine years ago, BTG con­tracts 5,000 con­sul­tants and pro­fes­sion­als around the world. Most have MBAS and years of ex­pe­ri­ence work­ing or con­sult­ing in var­i­ous in­dus­tries. When a client needs help, BTG as­sesses the scope of the project and of­fers a choice of a few po­ten­tial con­sul­tants with suit­able back­grounds. Most projects re­quire a sin­gle per­son or a small team. And be­cause they’re self-em­ployed, BTG’S con­sul­tants don’t come with the over­head costs of those em­ployed by a large com­pany. “Clients hire only the per­son or peo­ple they need for the time they want, and we pro­vide ac­cess to tal­ent that can be hard for mid­size com­pa­nies to get,” says BTG’S co-founder and chief ex­ec­u­tive of­fi­cer, Jody Green­stone Miller.

More than one-quar­ter of BTG’S clients are busi­nesses with rev­enue of $1 bil­lion or less—and that share’s been steadily grow­ing. “We mar­ket mostly to big com­pa­nies, but mid­size firms are find­ing us, ei­ther through word of mouth or through the in­vest­ment com­mu­nity,” Miller says. BTG gets a cut of each project fee; rev­enue has grown 50 per­cent an­nu­ally for the past five years and is on track to sur­pass $40 mil­lion in 2016, she says.

Heart­land’s Green­stein told BTG he needed a se­nior con­sul­tant who un­der­stood the ad­min­is­tra­tive out­sourc­ing his com­pany han­dles. He also sought some­one who’d work closely with his five-per­son staff and help them broaden their prob­lem­solv­ing skills. “I’m a huge fan of Mckin­sey and the work they do, but I didn’t need a big team off in the cor­ner work­ing by it­self or the over­head costs that go with hir­ing them,” Green­stein says. “With BTG’S model, when we need an ex­tra day or two to think things through or to clean up data, we can af­ford to take that time.”

The con­sul­tant he hired through BTG, Chris­tian Frank, was, like Green­stein, a for­mer Mckin­sey em­ployee, and had ex­pe­ri­ence in health-care and ad­min­is­tra­tive out­sourc­ing. He’d also been an ex­ec­u­tive at IBM and at ADP, a provider of ad­min­is­tra­tive ser­vices to global com­pa­nies, and he’d run his own startup.

Heart­land is al­ready act­ing on Frank’s rec­om­men­da­tions. With smaller clients, “you’re much closer to the ul­ti­mate de­ci­sion-mak­ers than at large cor­po­ra­tions,” the con­sul­tant says. “Some­times ev­ery­one agrees with an idea you’ve helped for­mu­late, and then, in­stead of be­ing sent through seven dif­fer­ent man­age­ment lay­ers for ap­proval, it’s put into ac­tion the next week.” Frank is now start­ing a sec­ond con­sult­ing project at the com­pany aimed at low­er­ing costs and im­prov­ing qual­ity in op­er­a­tions.

Other mid­size com­pa­nies use both tra­di­tional con­sult­ing firms and BTG. At Broad­ridge Fi­nan­cial So­lu­tions, which has $3 bil­lion in an­nual rev­enue and pro­vides in­vestor com­mu­ni­ca­tions and tech­nol­ogy to fi­nan­cial in­sti­tu­tions, Chief Op­er­at­ing Of­fi­cer Tim Gokey hired con­sul­tants from big com­pa­nies in­clud­ing Bos­ton Con­sult­ing Group to carry out due dili­gence on ac­qui­si­tions, plot strat­egy, and han­dle projects that re­quire a lot of data anal­y­sis. They could get a lot done quickly, didn’t need his su­per­vi­sion, and also had ac­cess to ex­ten­sive re­search from their firms, he says.

Gokey taps BTG for projects re­quir­ing a sin­gle con­sul­tant who can help him and his man­agers map a strat­egy. Six years ago, soon af­ter he ar­rived at Broad­ridge, based in Lake Suc­cess, N.Y., Gokey hired a con­sul­tant through BTG to help him re­shape mar­ket­ing. He liked the con­sul­tant’s work so much, af­ter six months he hired her as his full-time chief mar­ket­ing of­fi­cer. BTG’S ex­ten­sive net­work is cost- ef­fec­tive, Gokey says, “and some­times we can even re­cruit from it.” �Carol Hy­mowitz

The bot­tom line With 5,000 con­sul­tants on tap, Busi­ness Tal­ent Group has seen rev­enue grow 50 per­cent an­nu­ally for the past five years.

me­chan­i­cally and cos­met­i­cally,” says Bloch, who was a part­ner at ven­ture cap­i­tal firm Grey­lock Part­ners.

Tra­di­tional chains such as Car­max have helped im­prove the used-car buy­ing ex­pe­ri­ence. But many con­sumers still dread walk­ing onto a dealer’s lot. Vroom and other used-car e-tail­ers say they re­move the has­sle and hard sell. All of­fer hag­gle-free pric­ing, free de­liv­ery, and re­turns within a lim­ited pe­riod.

Amer­i­cans buy 40 mil­lion pre­owned ve­hi­cles a year, yet Car­max, one of the largest play­ers, has just 2 per­cent of the mar­ket. With plenty of room to grow, Vroom has raised more than $250 mil­lion in eq­uity and debt from in­vestors in­clud­ing Gen­eral Cat­a­lyst Part­ners, Cat­ter­ton, and John El­way, the for­mer quar­ter­back who’s now gen­eral man­ager of the Den­ver Bron­cos, the 2015 Su­per Bowl cham­pi­ons. In 2015 in­vestors poured more than $900 mil­lion into used-car e-tail­ers glob­ally, al­most dou­ble the amount from the prior year, ac­cord­ing to CB In­sights.

Vroom is bet­ting it can win over con­sumers by com­bin­ing tra­di­tional deal­er­ship ser­vice with the ro­bust se­lec­tion on­line shop­pers have come to ex­pect. The com­pany spe­cial­izes in ac­ci­dent­free, low-mileage cars. It’s hard to find any­thing on its web­site man­u­fac­tured be­fore 2013. There are more than 35 brands—in­clud­ing, re­cently, an As­ton Martin and a few Tes­las.

Vroom de­vel­oped its own lo­gis­tics soft­ware to keep tabs on its in­ven­tory of as many as 4,000 ve­hi­cles. Bloch says the pro­gram helps the com­pany’s fa­cil­i­ties in Dal­las and Hous­ton, where ve­hi­cles are in­spected and prepped for sale, work as smoothly as a fac­tory assem­bly line. Buy­ers get a 90-day war­ranty, seven days to re­turn the car for a full re­fund, and one year of road­side as­sis­tance. Bloch says his prices are 8 per­cent lower on av­er­age than those of other deal­ers. Af­ter click­ing “Buy,” a cus­tomer typ­i­cally re­ceives her car in less than a week.

Vroom’s two fa­cil­i­ties process a few hun­dred cars a day, us­ing al­go­rithms to fig­ure out which ve­hi­cles should be loaded onto which truck to be de­liv­ered where. The com­pany farms out half the de­liv­er­ies, but in the next 12 months, Bloch plans to bring the whole op­er­a­tion in-house, so Vroom can move to 24-hour de­liv­ery. Of course, that means buy­ing trucks, hir­ing driv­ers, and adding fa­cil­i­ties, in­clud­ing one open­ing this year in Indianapol­is.

Be­cause its fixed costs are higher than most e-tail­ers’ and its prices are cheaper than those of­fered by tra­di­tional deal­ers, Vroom will need to move a lot of metal very ef­fi­ciently to make money. The com­pany says it sold tens of thou­sands of cars last year, gen­er­at­ing about $900 mil­lion in rev­enue. Get­ting the cars out the door quickly is key, be­cause their value de­pre­ci­ates ev­ery day they sit un­sold. The longer it takes, says Bloomberg In­tel­li­gence an­a­lyst Kevin Ty­nan, the less Vroom makes and the less cash it has to buy more in­ven­tory or build out op­er­a­tions. Bloch de­clined to spec­ify a time­line to prof­itabil­ity, say­ing the com­pany is fo­cused on in­vest­ing in growth.

In April, an­other flood hit Hous­ton. At 6 a.m. on a Mon­day morn­ing, about two dozen Vroom em­ploy­ees braved the rains to move ve­hi­cles to higher ground. To iden­tify the most high-risk cars and their lo­ca­tions, the work­ers con­sulted newly tweaked soft­ware. This time, Vroom lost only about a dozen ve­hi­cles. �Jing Cao

Sales of cer­ti­fied pre-owned ve­hi­cles 1Q ’11 1Q ’16

700k 550k 400k The bot­tom line Un­like ri­val mar­ket­places for used cars, Vroom buys and in­spects all of the ve­hi­cles it lists for sale on its web­site.

Edited by Cristina Lind­blad Bloomberg.com

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