Andre Schneider | Square One Foods
The founding partner of the private equity firm backed by Austrian food and drink giant Spitz has a sharp eye for investing in better-for-you brands with mass appeal
Andre Schneider is the founding partner of Square One Foods, the Austrian private equity firm established in 2018 to invest in challenger food and drink brands. The company is backed by the Scherb family, the owner of Spitz, one of the largest food and drink manufacturers in Austria.
“Walter Scherb is a close friend of mine,” said Schneider. “One day, we were talking about the food and beverage market and how the environment is changing. We could see that many small, young start-ups were starting to grow at high speed, taking up the market share of the incumbent food companies.”
Spitz’s business is close to 80% private label contract manufacturing, so Schneider and Scherb knew that focusing on new brands wouldn’t hurt its business. However, there was an opportunity to help these companies accelerate growth, building on the experience and connections the company has in the food and drink space.
“We have Spitz in the background, but we are operating as a completely separate entity,” says Schneider. “We don’t have any reporting line to them or any special goal for our portfolio to be integrated into theirs,” he adds.
The focus, Schneider says, is on helping portfolio companies grow, but if there’s synergy, for example, a drink product that could be produced at Spitz, then a deal could be made if that’s for the benefit of both companies.
Schneider, who has a background in management consulting, agreed to embark on this project. “We created Square One Foods as a one-stop-shop for young food and beverage companies,” he says.
The investment strategy
Square One Foods invests in early-stage companies producing a food or drink product that is aligned with the better-for-you global trend. Plant-based, low-sugar, functional food and drinks are all part of it.
“We like to keep [the focus] open, and we tend to invest in companies with a brand or product we can relate to,” says Schneider.
“We are all very health-conscious, maybe a bit too much because products have to have a mass appeal. That’s a question we always ask ourselves: is this product ready for the mass market or a niche?” he adds.
Because Square One Foods only invests if the team can also bring value to the table, apart from capital, the companies on the radar are businesses with around €600,000 in revenue.
“We invest in companies at this stage as this is where we can contribute the most,” says Schneider, adding the cheque is for up to €250,000.
“We’re lucky that we’re funded by a family office. This gives us the opportunity to be more flexible with the investment horizon,” says Schneider. He explains that while the investment contract doesn’t have an exit clause, Square One Foods signs to whatever future works for the founders.
“[Founders] have different views. We get the impression that some have a watch on their wrist in countdown mode and others are thinking long-term,” says Schneider. “We want to know what the plan is. If it’s two, five or seven years, that’s fine.”
Having the Spitz backing has been fundamental to Square One Foods’ mission of adding value to its portfolio companies besides capital. This approach is at the core of its investment philosophy.
Schneider explains that all prospective companies are encouraged to do due diligence on their side. “They should speak to any of our portfolio companies to find out what working with us is like,” he says.
Today, Square One Foods is made up of a team of four, who take an active, strategic direction for the companies they support.
Schneider says the work is built on three pillars: networking with retailers, food and drink production experience, and third-party expertise.
“We have close collaborations with every German-Austrian retailer, and have connections with UK retailers as well,” says Schneider. “They are open to working with us to get our products listed.”
He says that Spitz’s assets and resources are available to help portfolio brands with lab testing, production expertise, legal know-how, and so on.
“For topics where we don’t have the expertise, for example, how to optimise a web shop, we’ve got expert partners that can provide these services to us,” says Schneider.
Portfolio brands for global trends
After two years in the business, Square One Foods’ portfolio has grown as fast as the brands it has brought into the fold.
“We are mostly focused on European brands. The bulk in our portfolio comes from Germany, a bit from the UK and Austria. The next [company we will invest in] might be from Belgium,” says Schneider.
Square One Foods has invested in 10 companies, including German Löwenanteil, the maker of a range of organic, ready-made meals for sports enthusiasts, and Marmetube, a company making fruit spread in a tube.
Other brands in the portfolio are Saturo of Vienna, the producer of nutritionally rich meal replacement drinks, and Adonis, a UK company making low-sugar nut bars with plant-based ingredients.
“We simply want to invest in anything you can eat or drink, which is nice from a portfolio perspective because all our companies are in a different segment; they are not competing with each other,” says Schneider.
Schneider explains that brands are considered Square One Foods family, and they are encouraged to exchange benchmarks, such as online traction, KPIs and so on, so they can grow together.
“They all have the same issues, but different approaches on how to deal with them,” says Schneider. “We know, for example, that if one brand is really good at selling on Amazon, but another is struggling, we can just put them in contact to exchange ideas.”
Bold and innovative
Unmilk is among the newest brands in Square One Foods’ portfolio. The company was involved from the very beginning and worked with Jennifer Schäfer, its founder, to sort out branding and the commercialisation strategy.
Schneider explains: “The market for milk alternative is very competitive. If you want to have a chance, you need to stand out with the marketing message and packaging.”
The company worked with an agency, and the result speaks for itself. Unmilk is presented by the brand name upside down, breaking all the industry rules of branding.
“There was negative feedback on the name Unmilk because the prefix ‘un’ is usually associated with a negative. Still, we thought the opposite and turned the word upside down, which again is very unusual,” says Schneider.
The branding, he says, is built on the notion that Unmilk is turning the milk industry upside down.
Schneider explains: “The branding doesn’t follow the industry standard of having the brand at the top, followed by the type of product and taste, and all the nitty-gritty stuff at the bottom. Here, we’ve got the brand at the bottom written upside down, the taste in the middle and the nitty-gritty info at the top.”
Unmilk is due to hit the market in the coming months and Schneider says the company is in talks to secure stockists. “We think that by November Unmilk should be on the shelves.”
We are yet to see the result of the Unmilk branding, but for Schneider this is a great example of a brand that’s made a bold move to stand out. “Taking the risk in an industry that is competitive is the only chance to make it,” he says.
Square One Foods: A rewarding experience
Square One Foods might be a two-year-old private equity company, but it’s a well-known name in the industry. “We get hundreds of applications a year, probably because the industry is a close-knit network and people talk about us,” says Schneider.
He recognises that back in 2018, he and his colleagues had a tough time finding brands in which to invest – attending shows, and holding interviews and presentations at start-up events.
Despite the wave of applications it receives, Square One Foods proactively approaches companies, too. With this mindset, Schneider got in contact with Löwenanteil.
“I saw an ad on Facebook and I wanted to order for myself,” he says. “It looked like a young company to me, so I emailed them with a few questions. At the time, Löwenanteil was about to launch a funding round, and then decided to work with us.”
Schneider admits that at the beginning, Square One Foods was a bit of an experiment, and it was certainly a new field for him.
“I’m very happy to say that things have been very positive over the past two years. We have made 11 investments, the growth is great, and the feedback from the industry is great too. So far, this has been a successful journey, and I look forward to next year,” he says.
The one thing Schneider likes most about Square One Foods is that the businesses he gets to work with are diverse. “Basically, we are talking with the chief executives of the next food generation, sharing ideas and strategic thinking to take the company to the next level. We are helping them grow and that’s a very rewarding experience,” he concludes.