Management Buyout: Operational Improvements

Kronos Foods Corp.

Glendale Heights, Illinois

Type of business: Manufacturer and distributor of specialty Mediterranean food

Situation: By 2013, Kronos was well-established as a Greek food company — the country's largest maker of gyros meat, as well as products like pita bread, hummus, and sauces. The company had an unmatched brand in the foodservice channel, had expanded into retail accounts and several new product categories, and had consolidated operations into a new 200,000-square-foot facility. But in the face of a rapidly-changing food market and volatile commodity prices, it became clear that Kronos's operations hadn't kept pace. Prospect Partners saw an opportunity to re-examine how Kronos was run to make operational improvements that not only would improve Kronos's bottom line, but allow for investment in a new phase of growth, ultimately creating a more highly-valued food company.

Our Strategy: We believed Kronos could be the leader of a larger niche market — specialty Mediterranean food — by capitalizing on opportunities such as growing consumer demand for that food category and the company's heritage of product innovation and distribution through foodservice and food retail channels. Achieving that vision, however, would require focus on the internal workings of the company — undertaking objective analysis, hiring more executive management capable of leading corporate transformation, and investing in all facets of the business. Kronos, which prior to moving into its new consolidating facility had operated its baking, meat and distribution units out of separate buildings, needed to optimize its new manufacturing capabilities, professionalize its operating practices and quality-control processes, update systems and equipment, and re-focus its product development practice while leveraging the Kronos brand.

Results: Kronos became a market-leading Mediterranean food manufacturer and distributor, largely to the national foodservice channel, with a wide line of differentiated products marketed primarily under the Kronos brand. Prospect Partners supported many of Kronos's biggest initiatives, including recruiting veteran management to the company, a trio of talented leaders as CEO, COO and CFO, who worked extremely well together and established and executed a clear growth strategy that focused on the company's core competencies with remarkable acumen and passion. Transformational operational initiatives included refocusing operations utilizing sophisticated KPI reporting and enhanced communications, revamping purchasing strategy with sophisticated testing capabilities, and rationalizing SKUs and unprofitable accounts. As a result, Kronos achieved substantially increased efficiencies and expanded production capacity, and saw big benefits in food safety, quality control, and margin stability. Other major process improvements, like standardized reporting systems, better financial reporting and analytics, manufacturing performance metrics, and more stringent product quality standards, led to reduced operating expenses and working capital requirements. Once its operational house was in order, Kronos was able to accelerate investment into R&D, including the development of KronoBroil® gyros slices, the result of a revolutionary new Kronos manufacturing process using robotic slicers. KronoBroil® was the largest product launch in the company's history. In the end, during Prospect Partners' investment period, Kronos more than doubled revenue and more than tripled EBITDA.

Exit: In 2016, Prospect Partners sold its interest in Kronos for a significant gain to a larger financial buyer supportive of management's plan to continue building the company's robust Mediterranean platform. Management reinvested in Kronos to participate in the next phase of the company's expansion.

Our Philosophy: To be highly engaged collaborators, providing significant financial support and strategic guidance to support a veteran management team in executive and achieving their strategic plan.

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"Kronos Foods thrived under the ownership of Prospect Partners, which shared our entrepreneurial drive and commitment to product innovation and quality. Their access to capital and significant investment in our manufacturing operations and new product development, along with their strong experience guiding middle-market companies to growth, allowed us to become the recognized leader in Mediterranean specialty foods."

—Howard Eirinberg, CEO,
Kronos Foods Corp.


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