Real Foods CEO Dean Kowarski announced today that Kleoss Capital Fund 1, managed by Kleoss Capital, has acquired a significant minority shareholding in Real Foods (owners of the KAUAI, NÜ Health Café and Kohu brands), to enable it to pursue exciting new acquisitions in the natural food industry in the near future.
Real Foods, founded by Dean Kowarski in 2013, and partnered with Genesis Capital Partners in 2014, is at the forefront of the global trend towards health and wellness, and aims to be the leader in shaping the South African natural food industry.
Kleoss Capital is a 100% black-owned South African private equity investment manager with a level 1 Broad Based Black Economic Empowerment (“B-BBEE”) accreditation, investing in South African businesses. Its primary objective is to generate returns for its investors by targeting companies that either show high growth potential or are strong market leaders in their sectors.
“Finding a like-minded partner was very important to us,” says Kowarski. “In talking to Kleoss Capital, we realised that we had a partner that shared the values of transparency, authenticity and an entrepreneurial approach to our business that makes Real Foods such a strong leader in the health and wellness marketplace.”
“Kleoss also provides another valuable resource,” he continues, “in that they proactively engage with their investments and businesses at a board and strategy level. So they add a wealth of expertise to our company that will be important to our planned expansion.”
In 2015, Real Foods announced the acquisition of Kauai, which it has since successfully rebranded into a premium brand in the Fast Casual market. The new positioning has refocused Kauai on tasty, healthy and natural food, with an emphasis on nutrition and responsible sourcing.
The group has also attracted like-minded partners in the health & wellness space: Virgin Active have entrenched their long-term relationship with Real Foods as their nutrition partner, and the group was also selected as a launch partner for Discovery Vitality’s Active Rewards Programme.
Creative growth strategies like this appealed to Kleoss Capital. “The strong management team at Real Foods has achieved an incredible amount in a very short time, and this has been a major factor in our decision to invest,” says Kleoss Capital CEO Hale Matsipa. “But this is also a very attractive investment sector for us, and natural food and wellness is a unique subsector that targets an economically resilient and growing portion of the population.”
Kleoss Capital Partner Zain Laher adds: “In our view, the business also shows massive potential for international expansion opportunities, given global market developments.”
Kowarski, Laher and Matsipa agree that the venture is potentially game-changing for the South African food sector. “We are also excited about BEE transformation within Real Foods. For example, there is potential to introduce black controlled franchise stores within Kauai. This would be our modest contribution within Real Foods to creating black entrepreneurs through a franchise model, particularly amongst the youth. We have found Real Foods very receptive to our ideas around BEE transformation” says Matsipa.
Globally, the natural food and health and wellness markets have grown exponentially over the past few years. A recent Fortune500 ranking report showed a clear consumer movement towards healthier food options, with most traditional commercial fast food retailers showing declines in the ranking.
Kowarski believes that the consumer shift towards well-being and natural products is undeniable: “The Health Food Industry is showing massive growth globally, and we are seeing that happening in South Africa,” he says, citing among others the Nielsen Global Health and Fitness Report, and US-based Fast Casual’s Top 100 Movers and Shakers Report.
“There are three health-focused food restaurants in Fast Casual’s US top 10 (Sweet Green, Zoe’s Kitchen & Native Foods Café),” he explains. “In Southern Africa, we see our own fast casual health brands – Kauai, Kohu and NÜ Health Café – as the market leaders in this space. Kauai, Kohu and NÜ Health Café have 149 stores in South Africa, Namibia, Botswana, Mauritius, and Dubai.”
Given the success of the Real Food brands, the signs are clear that South Africans want options that are in line with the Real Foods’ philosophy. The company affirms that this partnership will allow the company to provide healthy, natural food products to an ever-increasing market of health conscious consumers.