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Kar’s Nuts acquires Sanders as Detroit-born brands combine

Regional chocolate and caramel icon Sanders is being acquired by another Detroit-born snack maker, Kar Nut Products Co.

Kar’s Nuts, an 85-year-old trail mix manufacturer based in Madison Heights, on Wednesday acquired Sanders owner Morley Candy Makers LLC. They did not disclose a purchase price or other details of the deal.

Together Kar’s and Clinton Township-based Morley create a snacks and candy maker with an expected $185 million in total sales this year. They employ 525 people, mostly in Michigan.

The integration means a concerted national distribution push for Sanders’ candy and less focus on its ice cream-slinging Michigan storefronts.

Both ship products across the country, but Kar’s distribution network is more vast: Shoppers can find their nuts and mixes in more than 70 different stores or chains, ranging from Ace Hardware to Piggly Wiggly, Sam’s Club, Dollar General and Circle K convenience stores.

Sanders expands the trail mix maker’s product line from relatively healthful snacks to what Kar’s President Nick Nicolay calls the “premium indulgent space.”

Sanders, bought by Morley in 2002, has made confections for 143 years. It’s best known for artisanal chocolates and caramels, dessert toppings and its locally ubiquitous Bumpy Cake. Kar’s also inherits eight Sanders Chocolate & Ice Cream Shoppes in metro Detroit, Mackinac City and Mackinac Island.

Morley wants to make Sanders “America’s confectioner,” CEO Brian Jefferson said, and this acquisition is the way to do it.

To find Sanders products now in Denver, for example, you would need to visit Saks Fifth Avenue; in Dallas, Saks or internationally focused grocer Central Market. Sanders is widespread, however, in specialty grocers and department stores such as Marshalls, Home Goods and Kohl’s. It does sell nationally through grocery chains Meijer and Costco — and regionally and “growing” through Kroger. But it’s angling for a greater grocery and convenience store presence, especially as convenience stores become more “upscale,” Jefferson said.

Jefferson; his wife, Karen; and a group of other investors acquired Morley a little more than a decade ago. At the time, it had annual sales of $15 million to $20 million. Doubling down on the Sanders brand led to years of growth.

Kar’s will initially focus on candy distribution, Nicolay said. It delivers direct to around 4,000 stores in Michigan alone and is looking specifically at Sanders’ caramel mini-bites — one of its most pervasive grab-and-go offerings.

“We’re not going to let go of cakes and ice cream,” he said. “But the candy, for us, is where they have the greatest reach so far and where we feel we have the greatest immediate opportunity.”

In fact, QVC recently showcased Sanders candy on its online and TV networks, which brought strong sales and a nice bump in national exposure for the local brand.

The new focus means continuing a yearslong holding pattern for Sanders’ physical stores. It could also mean eventual downsizing, though Nicolay said none is planned.

The stores are profitable, Nicolay and Jefferson said, and offer brand recognition. But they’re not what stands out, in terms of growth potential.

“I think retail is somewhat challenging, brick-and-mortar retail,” Nicolay said. “… We don’t see any changes to that right now, but we’ll evaluate those a little bit later.”

Jefferson said he isn’t worried about the stores’ futures, because they’re still profitable.

Incorporating an entirely different brand into Kar’s repertoire is new; this is the company’s first acquisition.

It’s part of a new strategy since the food manufacturer sold a majority stake to New York-based private-equity fund Palladium Equity Partners LLC in spring 2017. Palladium and other equity holders have since made follow-on investments, including to support the acquisition of Sanders.

Nicolay declined to provide details on those investments.

Kar’s expects to keep all Morley employees, Nicolay and Jefferson said, and both are hiring: Morley for at least 20 positions and Kar’s for around a dozen. Morley will continue operating from its recently expanded facility in Clinton Township. Kar’s manufactures in Madison Heights.

Nicolay will lead the combined company and Jefferson expects to retire, possibly in around six months, after assisting with the integration and helping with product development. Jefferson didn’t provide details, but said new snacks combining the two brands’ specialties are in the works.

Morley Candy Makers still uses its namesake brand on products sold through fundraisers, but its overwhelming focus is on Sanders.

KPMG Corporate Finance LLC was Sanders’ financial adviser on the deal. Giarmarco, Mullins & Horton PC served as Sanders’ legal adviser and Jaffe Raitt Heuer & Weiss PC was legal adviser to Kar’s.

 

Posted By: Crain’s Detroit Business on October 24, 2018.  For more information, please click here to read the source article.

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