Earth Fare Buyer Eyes Growth

FLETCHER, N.C. — Oak Hill Capital Partners said last week it has acquired an 80% ownership stake in Earth Fare in a move it said would prepare the 25-store natural food chain for “its next phase of growth.”

Oak Hill, a New York-based private equity firm, is buying the share from Monitor Clipper Partners, the Cambridge, Mass.-based private equity group that had owned Earth Fare since 2006. Monitor Clipper, along with Earth Fare’s current management team, led by Jack Murphy, its chief executive officer, will retain a minority ownership. The transaction values the company at $300 million.

Earth Fare was founded as a single store called Dinner for the Earth in Asheville, N.C., in 1975. It describes itself as employing the strictest food standards in the supermarket industry. Its stores average around 25,000 square feet and are located in eight states between Florida to Ohio.

“Earth Fare is well positioned for expansion given robust consumer demand for natural and organic food, widespread interest in environmental sustainability, and significant market opportunity across the United States,” Tyler Wolfram, a Partner of Oak Hill Capital, said in a statement.

Jay Jacobowicz, founder and president of Retail Insights, a Brattleboro, N.H.-based consultant to the natural products industry, in an interview with SN last week said opportunity for Earth Fare to expand was considerable, citing robust growth for natural/organic foods; industry trends favoring smaller retail boxes; and the availability of such sites. “How high is up?” he said.

He said he expects the chain to focus on expanding into smaller markets such as Akron, Ohio, where it arrived a year ago. Earth Fare said it would open a new store in Columbus, Ohio, later this month.

“The supernatural category is where the largest growth is coming from in the industry, and it’s meaningful that while Whole Foods has an average 38,000-square-foot footprint, the others in this category are about 25,000,” Jacobowicz said. “There is a huge difference in being able to find suitable real estate between a retailer who wants 38,000 square feet and one that wants 25,000 square feet.”

He estimated Earth Fare’s sales to be between $250 million and $375 million. The company declined to comment on its sales.

Neil Stern, senior partner with McMillan Doolittle, Chicago, noted the deal echoed a roll-up of natural retailers now under way on the West Coast led by Sprouts Farmers Market, a private-equity-backed retailer which earlier this year agreed to acquire Sunflower Farmers Market. Stern said he felt Earth Fare still had plenty of opportunity to expand in existing and contiguous markets and in contiguous spaces.

“Their model is little a bit of a Whole Foods junior,” Stern said, “but they run a smaller box that’s a little closer to the Wild Oats model. If they can differentiate from a service standpoint and run stores that are a little more intimate, I think they will be fine.”

Oak Hill previously owned New York’s Duane Reade drug chain and was said to have been interested in acquiring another natural food banner, The Fresh Market, when that chain was for sale few years ago.