IVCA Feature: The 2017 Private Equity Portfolio Company of the Year is Kronos Foods Corporation

IVCA Feature: The 2017 Private Equity Portfolio Company of the Year is Kronos Foods Corporation

November 8, 2017

One of the preeminent food companies, with deep Chicago roots, is Kronos Foods Corporation. From its founding in 1975 to the influential corporation it is today, Kronos is without peer, especially in the Mediterranean foods and restaurant industry. In 2004, Kronos received a significant boost when it was purchased by private equity firm Prospect Partners of Chicago, and the PE firm and the food company partnered through 12 years of significant growth. After that successful affiliation, in September of 2016, Prospect Partners sold Kronos Foods. Because of that history of success, the IVCA 2017 Private Equity Portfolio Company of the Year is Kronos Foods Corporation.
 
In accordance with that honor, the Prospect Partners/Kronos Foods story was related by two of its major representatives. Howard Eirinberg is the current CEO of Kronos Foods Corporation, and from Prospect Partners is Lou Kenter, Founding Principal and Chairman of Kronos Food during their partnership.
 
Kronos Foods and Prospect Partners
 
According to Howard Eirinberg, Kronos Foods was started by Greek immigrant and entrepreneur Chris Tomaras in 1975. Tomaras streamlined the iconic gyros meat broiler, called the “KronoMatic,” and delivered the ready-to-slice meat “cones” to cook within those broilers. The consistency of appearance, taste, structure and performance of the broiler made the KronoMatic a familiar sight in Greek and fast food restaurants. After 20 years,  founder Tomaras retired, and sold the company to an investment firm. Prospect Partners bought Kronos Foods in 2004
 
As Lou Kenter related, Prospect Partners is a private equity investor in unique smaller lower-middle-market companies that are leaders in their niche market. At the time of the Prospect purchase in 2004, Kronos was a true niche leader... it was then best-known as a specialty Greek food supplier, and the country’s largest manufacturer of gyros meat.
 
“Kronos also possessed attractive growth characteristics, including a heritage of product innovation, strong distribution, and a highly knowledgeable management team, “Kenter said. “We believed all this served as the core foundation to build the company into a broader Mediterranean food company, with wider appeal and reach.”
 
Partnership and Plans
 
Kronos Foods was typical of many private family-owned businesses that Prospect Partners had experienced – entrepreneurial, successful, and possessing deep industry expertise – but lacking the investor understanding of what additional pieces needed to be put into place to build a lasting business. The strategy was to establish a solid infrastructure, business systems/accounting practices and a well-rounded management team. Prospect Partners began by modernizing process initiatives, such as standardized reporting systems, plant side financial reporting, identification of performance indicators and the establishment of high quality product standards.
 
Kronos also moved its operations from separate buildings in Chicago to a new state-of-the-art 210,000 square foot facility in Glendale Heights that doubled its meat processing capacity, provided on-site freezer space for product storage and significantly expanded meat, baking and sauce production capacity. At that point, Prospect also brought in an expanded senior management team, including hiring Howard Eirinberg – formerly of Vienna Beef – as Chief Executive Officer.
 
Kenter related another advantage of the new facility, “It improved company-wide communication, since operations were under a single roof.”
 
Changes and Evolution
 
According to Howard Eirinberg, “It was Prospect Partners who also acquired an add-on business which helped the company grow beyond food service and into the retail space. Under Prospect’s watch, Kronos became a ‘one stop shop for all foods Mediterranean,’ and the firm helped the company move to a beautiful new plant in 2009. Access to capital and strong experience in guiding middle market companies to growth were strengths of Prospect Partners, and that allowed Kronos to become the well recognized leader in Mediterranean specialty foods.”
 
Kenter noted how the partnership yielded some “beef” on the product side... Kronos introduced ‘KronoBROIL,’ a revolutionary manufacturing process that flame cooks the gyros cones to perfection and then robotically carves them into strips, so they are very easy for customers – such as diners, Arby’s and Quiznos – to heat up and serve. Kronos also developed a line of pita products, including pizza crusts, as flatbreads and new Mediterranean confections.”
 
The Sale, the Summary and the IVCA

As Lou Kenter summed up, “The biggest accomplishment, in my view, is that we very successfully helped grow a family business into a strong, sustainable, and truly middle-market, company. We also are incredibly proud of the talented, deep and visionary management team there and believe Kronos has enormous continued upside potential.”
 
Howard Eirinberg noted, “I know there are many successful private equity deals out there every year, so to be chosen the PE Portfolio Company of the Year is truly a great honor, he added, “The IVCA is important in the cycle of private equity support. The IVCA assists firms like Prospect Partners, and in turn Prospect helped Kronos achieve success. It takes a village!”
 
In conclusion, Kenter said, ““The award is a true honor... and equally rewarding, it is a local company. The importance of having the IVCA for advocacy, for education, and for dialogue on the many wide-ranging issues that affect investors cannot be understated. The IVCA’s work helps PE and VC firms be better and more successful at what we do, and we are very grateful for that.”
 
Tables and tickets are now available for the 2017 IVCA Awards dinner, December 4th, 2017, at the Four Seasons in Chicago. Click here or contact Kathy Pyne directly at kpyne@illinoisvc.org or 312.241.1620.