Ziebold Q&A: Why He Left Bruce Wasserstein’s PE Firm For First Beverage

Last week, W. Townsend Ziebold jumped to First Beverage Group, a boutique financial services firm catering to the beverage industry. He joined First Beverage from Bruce Wasserstein’s PE firm, Wasserstein & Co.

Townsend has over 25 years in investment banking and private equity. He’s been a banker with First Boston Corp. and Wasserstein Perella, which was acquired by Dresdner Bank in 2000 (The merchant bank of WP was spun off in 2000 to form Wasserstein & Co.). Townsend has worked on some major deals, including KKR’s purchase of RJR Nabisco and SmithKline’s merger with the Beecham Group. At Wasserstein & Co., he worked on the buys of IMAX Corp., Maybelline Cosmetics and Turtle Mountain, a leading producer of non-dairy desserts.

Townsend, 49, officially joined First Beverage on May 9. I spoke to him by phone last week.

Q: You’ve been with Wasserstein since 1998. Why did you leave?
A. I left Wasserstein as Bruce Wasserstein unexpectedly passed away last year, and the types of investing I was doing for him (growth equity and venture) were no longer a focus of the firm after he passed away.

Q: Wasn’t it hard leaving after so long?
A. I had a very close relationship with Bruce, but after he passed away, the firm’s focus moved away from the smaller growth equity type of investments I was making. It was time to try something new that was both investment banking and PE-related. I actually am still consulting for Wasserstein on a few of the remaining growth equity investments in the fund there.

Q: Why did you join First Beverage?
A. I just think they have a great platform in beverages and consumer. They also focus on both investment banking and private equity which marries well to my background. To compete in today’s market place as a financial service firm, having deep industry expertise is essential for success.

Q: Who are the big players in beverages?
A. In spirits, you have four to five large platforms. The beverage industry is very large but pretty concentrated at the top. Most of those companies, the core brands are flat to moderately in decline. Many of those companies are looking for the next growth investment that they can put into their systems.

We’re seeing a lot of activity with large companies. Pepsi, Coke, Diageo are acquiring brands, because they’re looking for extra growth. They’re looking for the next investment that will take off. They’re looking for growth and to fill gaps.

Q. What are multiples in the sector? Were they affected by the downturn in 2009?
A. They were certainly affected by the downturn. Consumer brands aren’t as cyclical as other business. They weren’t as adversely affected. It’s been a situation where a company sees a strategic acquisition that fills a gap. M&A multiples have been quite high particularly for a small growing brand that can be plugged into a bigger buy. They’re valuing the business on growth and what its worth inside a system, so the multiples can be very high.

Q: Any notable deals you’d like to mention?
A. Coca-cola investing in Honest Tea. They bought 40% in 2008 and in March 2011, they bought the balance. That’s a classic example of a large company acquiring a basically hot growing player in the space. There are lots of emerging vodka and tequila companies that are hot brands that have been acquired by larger spirits companies. ABI (Anheuser-Busch InBev) in March purchased craft brewer Goose Island. This is representative of a transaction where a larger branded company buys a fast growing craft brewer. The beer market is very mature but the craft brewing segment is small and growing very fast.

Q: What about the soy milk? Is that still hot? I am also hearing lots about coconut water.
A. The non-dairy milk market is dominated by soy. But soy is in decline and almond milk and coconut milk are each growing faster than soy. It’s the same exact phenomena. They are smaller segments of the market but growing faster than the more mature soy side of the business.

Coconut water is getting a lot of buzz but the size of market in the U.S. is quite small. It’s an emerging area. The companies in the space have had limited distribution and the brands are small. It’s fascinating that Coke and Pepsi are looking for their next vehicle for growth, and they’ve identified one of these as the coconut water market (peHUB notes that Coke is an investor of ZICO, a producer of coconut water drinks, while PepsiCo owns Amacoco, Brazil’s largest coconut water producer).

Q: Coconut water has lots of electrolytes but it tastes bad.
A. Notwithstanding the mediocre tastes, it’s perceived as a hot market. If someone could improve the taste they’ve got a home.

Q: The first time I had coconut water was after some intense yoga. Do you practice yoga?
A. I practice twice a week and have done so since 2001. I practice Iyengar. I like it for the flexibility and also it’s frankly an hour in which I can just check out.