US health and wellness food group Landec Corporation has acquired California-based speciality olive oil and wine vinegar maker O Olive Inc. 

The price-tag includes an initial consideration of US$2.5m plus an additional payment of $7.5m over the next three years on the condition that Olive O meets pre-agreed EBITDA targets. 

In 2016, O Olive had approximately $3.6m in net sales and it realised break-even EBITDA. 

O Olive was founded in 1995 by Greg Hinson. Its products are sold in over 4,600 natural food, conventional grocery and mass retail stores, primarily in the US and Canada.

Molly Hemmeter, Landec’s president and CEO, said that the acquisition would enable Landec to capitalise on shifting consumer demand in the oil and vinegar category. “The oil and vinegar markets are currently experiencing a dramatic shift in consumer behaviour from conventional to natural and organic oils and vinegars and O Olive is uniquely positioned to take advantage of this transition,” she suggested. 

Currently the speciality oils and vinegars segment in which O Olive competes, accounts for $1.9bn of the $4.3bn US oil and vinegar market. However, Landec stressed, natural speciality oils are growing at 24% versus conventional products, that are seeing a 2% drop in sales per year. 

Hemmeter said that with Landec’s support, in terms of capital as well as sales, customer service, procurement and logistics capabilities, O Olive “can achieve its true potential”. The business will benefit from the capabilities and infrastructure of Landec’s food unit, Apio, the company suggested. 

Landec said it expects to realise synergies through the integration of O Olive and Apio. “Based on our preliminary forecast, we see an immediate opportunity to significantly increase O Olive revenues in Landec’s fiscal year 2018, and expect the business to be accretive in fiscal year 2018. For fiscal year 2017, we expect a net negative impact to net income of approximately $200,000, primarily from acquisition and integration related costs,” the company noted. 

Hinson, O Olive’s president and founder, added that the deal was a “milestone” for the company. “After two decades of carefully crafting our products in a responsible fashion without chemicals and preservatives that yielded unmatched quality and taste, we now have a like-minded partner that can help us grow our distribution, secure supply and bring our award-winning products to more consumers throughout the world.”