Cholula hot sauce weighing sale, sources say

15 September 2020 - 10:23 am UTC

by Bhavna Kaul, Emily Fasold and Anastasia Donde

Cholula, an L Catterton-backed producer and distributor of hot sauces, is exploring a sale, five sources familiar with the situation said. 


The sale process is in the early stages, three of the sources said. Morgan Stanley is advising the company on the sale, the fourth and fifth sources said. 


Cholula generates around USD 100m in revenue, one of these sources and an additional source said.  The company is aiming for a steep deal valuation of around USD 1bn, some of the sources said.


L Catterton acquired Cholula for an undisclosed price in December 2018. VACE Partners acted as exclusive financial advisor to Cholula, while Cravath, Swaine & Moore served as its legal advisor. L Catterton was advised by Kirkland & EllisCreel, McKinsey & Company, PwC, and Alvarez & Marsal


Large strategics and some financial sponsors are expected to look at Cholula. Logical strategic suitors are likely to include Kraft HeinzMcCormick & Co. and Conagra, one of the sources and a sector advisor said.  


The US seasoning, sauce and condiment production industry is projected to reach USD 23bn by 2023, with hot sauces a key driver, according to a 2018 Reuters report citing market research firm IBISWorld.


In 2017, McCormick agreed to buy Reckitt Benckiser Group’s food business for USD 4.2bn, adding Frank’s RedHot sauce and French’s mustard to its condiments category. Credit Suisse advised  McCormick on the deal and Morgan Stanley and Robey Warshaw were financial advisors to Reckitt. 


Cholula is named after the oldest still-inhabited city in Puebla, Mexico, and it was introduced in the US in 1989. It is made with a blend of “piquin and arbol peppers that complements a wide array of global cuisines,” according to a press release. Cholula is sold in Mexico as well as over 20 countries internationally. Some varieties of Cholula that are widely marketed include Original, Chipotle, Chili Garlic, Chili Lime and Green Pepper. 


L Catterton declined to comment. Cholula and Morgan Stanley did not respond to requests for comment.