There is A Rain Forest Growing in St. Louis, USA
11/3/97
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Headline: There is A Rain Forest Growing in St. Louis, USA
Source: St. Louis Business Journal
Date: 11/3/97
Author: Linda Tucci
Copyright: 1997, St. Louis Business Journal
Rainforest Co. takes $375,000 bite of crunch
There's a rain forest growing in St. Louis.
With the help of a $1 million investment from a local
venture capital company, The Rainforest Co. of St.
Louis acquired the environmentally sensitive maker of
Rainforest Crunch nut brittle. The assets were
purchased Oct. 22 for $375,000 in a Vermont bankruptcy
auction.
The purchase of the high-profile Rainforest Crunch
products -- created by Ben Cohen of Ben & Jerry's ice
cream -- will boost The Rainforest Co.'s annual sales
from $1 million to $4 million conservatively, as well
as add substantially to its 10-person staff here.
"The acquisition is significant for us because they are
much larger than we are in sales. However, they have
been struggling on the management and production side
for several years, and this is something we think we
can fix," said President John Huhn.
Founded five years ago by Huhn and Paul Nagel, The
Rainforest Co. markets a line of food and beauty
products made from ingredients from the world's rain
forests. The products are sold to a variety of
retailers, including the Wild Oats and Dierbergs stores
here.
Products bearing The Rainforest Co. name and miniature
green frog trademark range from the Jungle Munch line
of trail mixes and tortilla chips to the papaya body
wash sold under the trade name Source. The St. Louis
company also has been a distributor for Ben Cohen's
Rainforest Crunch.
The Rainforest Crunch operation, known as Community
Products Inc., filed for bankruptcy protection last
April with the intent of reorganizing but decided
abruptly in mid-September to liquidate its assets in a
bankruptcy auction Oct. 7.
Huhn and partner Nagel scrambled to put together
financing in the two-week window, ultimately securing
$1 million from Advantage Capital Co., a local venture
capital firm known as a "CapCo," or certified capital
company.
Such companies were recently certified by the Missouri
Department of Economic Development to receive
investments from insurance companies, which in turn get
insurance premium tax credits for their investments.
CapCos are allowed to invest in new or growing
manufacturing, processing or research businesses in
Missouri that meet the state's criteria on employment
and revenue.
Principals for Advantage Capital were traveling and
could not be reached for comment, but Stolar
Partnership attorney Marc Braun, who serves as legal
counsel for The Rainforest Co., said the Advantage
investment is remarkable on several counts.
"First, The Rainforest Co., for the first time in its
operating history, will be properly capitalized. The
second thing is that its sales will grow dramatically.
And the third truly wonderful reason is that the deal
was accomplished in 18 days. That kind of response and
turnaround time for a $1 million investment is
absolutely remarkable," he said.
Braun is the founder of the Can-Do Early Stage Venture
Capital Investment Club L.C., a large shareholder in
The Rainforest Co.
The financial commitment from Advantage is the latest
show of confidence in The Rainforest Co. by outside
private investors, including Can-Do. During the past
two years the company has raised $500,000 from 42
investors through two different stock offerings. The
infusion has allowed the company to quadruple its sales
from 1995 to 1997 as well as bring outside expertise to
the table.
"We have behaved ourselves and basically taken all the
steps a business should take to grow, from finding a
major investor soon after we started and getting an SBA
loan that is now paid off, to the private placements
and now this," said Nagel.
One of the keys to the company's growth, said Huhn, was
its decision in 1995 to shut down its four retail
locations and concentrate on its core wholesale
business and the development of new products. These now
include salad dressing, hot sauces, salsas, white and
dark chocolate-covered nut clusters, eight flavors of
tortilla chips, fruit and nut mixes and beauty
products.
The Rainforest Co.'s $375,000 bid for the Vermont
company buys the assets free of any liens and
liabilities, with creditors paid off with proceeds from
the sale. The assets include the inventory, trademark
and plant equipment at the company in Montpelier, Vt.,
where about 20 people are employed.
There are no immediate plans to move the Vermont
operations here, Huhn said, but that is a possibility
because the facility is too small and requires major
renovation.
"The Rainforest Crunch packaging says `handmade in
Vermont,' and believe me it is to the extent of every
bag being filled by hand and sealed by hand," Huhn
said.
Rainforest Co. is investing several hundred thousand
dollars more in Community Products to correct the
inventory and delivery problems that have plagued the
company during bankruptcy. The St. Louis company is
also hiring new marketing and salespeople to handle the
jump in business. Once new equipment, other
efficiencies and staff are in place, Rainforest Crunch
sales are projected to reach between $5 million and $10
million.
"We think the potential is phenomenal: gourmet toppings
for ice cream, yogurt, Rainforest Crunch brownies.
Instead of seeing a Snicker's pie when I walk into
Tippin's, I'd like to see Rainforest Crunch pie," Huhn
said.
While the nut brittle is used by Godiva chocolates, the
largest single customer is Ben & Jerry's Rainforest
Crunch ice cream. The ice cream flavor, according to
Huhn, is a top seller nationally and No. 1 in Europe,
where it was recently introduced. The St. Louis company
does not have an exclusive agreement with Ben &
Jerry's, so it conceivably could go to another ice
cream maker.
Huhn said he does not anticipate losing Ben & Jerry's
as a customer.
Community Products' mandate has been to harvest nuts on
a sustainable basis and donate roughly 60 percent of
its profits to conservation and peace organizations. In
its early years, Cohen's company donated more than
$500,000 to various organizations from its sales of
Rainforest Crunch.
The new owners share a similar commitment to the
rainforest, although not to the degree that ultimately
bankrupted Cohen's company. The Rainforest Co. donates
10 percent of its profits to environmental and social
organizations. Perhaps more importantly, Huhn said, the
company supports the small-scale local economies that
harvest the ingredients used in their products.
On the consumer side, there is also a price to pay for
environmental sensitivity. Rainforest Crunch's main
product is an 8 oz. box that sells for about $5. A 1.5
oz. candy bar retails for between 99 cents and $1.19. A
4 oz. bag of Rainforest Crunch popcorn sells for $1.99.
The Rainforest Co.'s most popular products at the
moment are its 16 oz. salsas, which retail for $4.99. A
12 oz. bag of Jungle Munch exotic fruit and nuts mix
sells for $3.99.