Mikey’s raises $5m, teams up with Factory LLC: ‘I wanted to partner with someone that was going to do more than just write me a check…’

Mikey’s raises $5m, teams up with Factory LLC

Allergy-friendly baked goods brand Mikey’s has teamed up with innovation and scale-up specialist Factory LLC, which will invest $5m in two tranches to help founder Mike Tierney scale the business and build a better-for-you product platform potentially spanning multiple categories.

Under the deal, Mikey’s – which was launched by Tierney in May 2014 and is already on course to generate revenues “in the neighborhood of” $5m in 2017- will move its HQ from Scottsdale, Arizona, to Bethlehem, Pennsylvania, where Factory LLC is building a new 40,000 square foot innovation center.

It will also work with the food industry veterans at Factory LLC – led by Rich Thompson, the founder of American Italian Pasta Company, The Meow Mix Company and Freshpet – to identify ways to operate more efficiently, boost distribution, develop new products and work more closely with retail partners, Tierney told FoodNavigator-USA.

“We’re growing really fast – we’re in around 3,500 stores and looking at triple-digit growth this year over last year, and doing that again in 2018 - but that brings its own challenges and I wanted to partner with someone that was going to do more than just write me a check.

“Having a physical home in Bethlehem where I can tap into resources – whether its digital marketing, or social media, or scale up facilities for new testing and innovation – you can’t put a figure on that," added Tierney, a CIA (Culinary Institute of America) trained chef.

Learning on the fly

He added: “Every entrepreneur goes through the process of learning on the fly, so for example, right now we have four warehouses throughout the country that distribute to all of our retail partners, well there’s a way to centralize that and we have to do that now. I’m also looking at opportunities, as we grow, to look at expansion with our [current] co-packer, or even doing something in-house given the experience the management team has here.

“You aren’t necessarily thinking at the start about what happens when you become a $10m or $20m brand, or even a $5m brand, so it’s trial by fire. But that’s what’s so great about working with Factory LLC – I think they will protect me from making those left turns off a cliff.

“So far, I’ve made a lot of left turns but somehow managed to keep the wheels on the road and turn the cart around, but as you get bigger, those turns can cost a lot more money, and they can be really detrimental.”

Just because something is gluten-free doesn’t make it healthy

In the short-term, said Tierney, who launched the business with his signature gluten-free English muffins but has subsequently branched out into sliced bread, muffin tops, pizza crust and tortillas, “We’re very focused on increasing our visibility and velocity with our current retailers through tools like social media and instore marketing, but beyond that I’m looking for a distribution increase, and developing new products.”

While all of Mikey’s products are currently gluten-free, dairy-free, soy-free and grain-free, Tierney is keen not to be pigeonholed as a ‘gluten-free’ brand, and says he’s tapping into a broader trend towards better-for-you, clean label, baked goods, coupled with the Paleo trend (in some stores, notably Walmart, Mikey’s is now stocked in a ‘Paleo’ set rather than the gluten-free or specialty bakery segment).

Mikey's frozen products use a small number of kitchen-cupboard ingredients that consumers recognize (eggs, honey), while recipes are based around more on-trend ingredients such as almond flour, coconut flour and apple cider vinegar rather than the rice flour, gums and modified starches characterizing the first wave of high-carb, gluten-free baked goods, he said.

“Just because something is gluten-free doesn’t make it healthy. You’ve got to offer more than just gluten free if you want to reach people. Gluten-free is just one attribute, and we want a bigger share of stomach. We’re tapping into a lot of trends, from low-carb, and Paleo to ketogenic. From social media and some other metrics, we’re also over-indexing in the 18-35-year age range and the gender split is around 80% female.”

Ticking all the boxes

Factory LLC – which was set up to acquire meaningful equity stakes in high potential food, beverage and animal health companies, and then help them innovate and scale – would typically focus on companies at a slightly later stage of their evolution, said Thompson.

However, Mikey’s ticked all the boxes, he said: “It’s got innovative, differentiated products that address real consumer needs and taste good, and it’s scalable. But above all it’s led by a great entrepreneur.”

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