Portfolio

Case Study

Truco Enterprises

Founded in 1991, Truco Enterprises is a leading developer and marketer of tortilla chips, salsa and queso under the On The Border® (“OTB”) brand. The OTB retail line was born in 1993 by leveraging the brand of the restaurant chain to gain consumer recognition and placement in retail stores. The company’s products are sold nationally through grocery retailers, club stores, mass merchandisers, and convenience channels.

Headquarters

Dallas, TX

Investment Date

2014

Exit Date

2020

Sector

Consumer

Growth Highlights

3x+

Adj. EBITDA Growth

$200M+

Sales at Exit

4.7x

Walmart Distribution Growth

$480M

Exit Enterprise Value

Transaction Highlights

Insignia developed an investment thesis focused on snacking,  informed in part by the team’s past experience and success in the food sector. Insignia identified Truco as a challenger brand in the salty snack aisle with strong consumer preference, exceptional velocity at its largest retail partners, and significant room to expand into mainstream retail.

Insignia’s proactive efforts and early engagement led to an invitation to a limited bank process. Over numerous meetings and dinners with Truco’s management team, Insignia built a strong relationship and a shared view of the company’s growth potential, which helped position Insignia as the team’s preferred partner.

Insignia acquired Truco in July 2014, with the founder and members of the management team retaining an equity stake alongside the firm. Over the course of the partnership, Insignia worked with management to expand Truco’s distribution footprint, launch new product innovation, and build a nationally scaled tortilla chip and dip platform.

Investment Thesis

  • Challenger to Frito-Lay as the #2 player in a large, growing category, with On The Border representing the largest non-Frito-Lay tortilla chip brand in U.S. multi-outlet retail
  • Significant opportunity to expand distribution, with ~2% market share in a $7B+ category, despite having the #1 tortilla chip velocity at Walmart and Sam’s Club
  • Opportunity to increase sales velocity through salesforce improvement, fact-based selling approach, and outsourced merchandising
  • Invest in independent product testing and R&D capabilities to further improve product differentiation and develop new adjacent products 
  • Optimize supply chain across the company’s network of contract manufacturers to further improve margins, production capabilities, and secure capacity for future growth

Value Creation

Insignia worked alongside Truco’s management team to execute its growth playbook, professionalizing the sales function to expand distribution for a differentiated product portfolio, investing in R&D to launch category-disrupting innovation, and generating significant margin expansion through supply chain improvements and operating leverage that more than tripled the company’s adjusted EBITDA during Insignia’s ownership. By the time of Insignia’s exit, Truco was well positioned for continued growth, with a seasoned leadership team, a multi-year innovation pipeline, and the manufacturing capacity to more than double its volume.

Enhanced Talent
& Leadership

  • Expanded and upgraded the sales team and introduced a fact-based selling approach
  • Appointed Mel Deane and Shane Chambers, former CEO of Tillamook Country Smoker, as co-CEOs in Q1 2019
  • New leadership closed significant distribution and innovation wins ahead of the sale process

Implemented Data-Driven Product Testing

  • Launched independent, third-party consumer blind taste testing
  • Reformulated the core Café Style chip based on test results, driving higher repeat purchase rates
  • Earned the highest consumer rating on great taste, the #1 purchase criterion, along with the highest Net Promoter Score and loyalty score among unflavored tortilla chip brands

Launched Category-Disrupting Innovation

  • Invested in R&D to improve existing chip products and develop new consumer-preferred products
  • Launched flavored chips, Fiesta Dippin’ Chips, Guacamole Salsa, squeezable salsa and queso, Jalapeño Queso, and refrigerated dips across grocery, club, and value channels
  • Grew salsa and queso grocery sales 31.7%, the fastest among national brands

Expanded Distribution

  • Leveraged relationship with Walmart to increase Walmart points of distribution from 7,500 to 35,000, and increased Sam’s Club tortilla chip category share from 29.6% to 50% from 2016-2020 YTD 
  • Built relationships with retailers across channels, including Costco, BJ’s, Target, Albertsons, H-E-B, ALDI, and Dollar General
  • Maintained the #1 velocity unflavored tortilla chip brand among national players

Optimized Supply Chain

  • Built a national network of 20 contract manufacturers strategically located to minimize freight costs, lead times, and inventory levels
  • Diversified distribution strategy that combined direct-to-warehouse and third-party direct store delivery to enable better control of inventory and merchandising, and generate higher margins
  • Reduced cost of goods by 10% through supply chain improvements, increasing EBITDA by ~60% and freeing up resources to reinvest in sales, R&D, and innovation

Secured the Brand

  • Concurrent with the sale of Truco, Insignia negotiated an agreement with On The Border Mexican Grill to acquire perpetual On The Border brand rights
  • Converted a licensed brand into an owned asset, enhancing its strategic value to buyers

We are thankful to our partners at Insignia Capital for all of their support. On The Border is now one of the fastest growing tortilla chip brands and the fastest growing dip brand in the category.

Shane Chambers, CEO of Truco Enterprises

The Outcome

Acquired by Utz Brands

In December 2020, Utz Brands (NYSE: UTZ) acquired Truco Enterprises for a total purchase price of $480 million. Over the six-year partnership, Truco evolved from a challenger brand into a nationally scaled platform and the fastest-growing tortilla chip and dip brand in the U.S.