Cincinnati, OH – The consumer-focused deal is atypical for River Cities Capital Funds, which led the round and provided the vast majority of the financing. River Cities is a Cincinnati-based firm that typically specializes in health care and IT, said Managing Director Dan Fleming.
Fleming, himself a veteran manager at Proctor, said that the consumer opportunity was difficult to pass up. “Because we’re a regional fund, we’re not investing on the coasts,” he said. “We reserve funds to invest in good companies and entrepreneurs who aren’t in our sweet spot, which is healthcare and IT.”
The firm has made select investments in other spaces, like media and manufacturing, as well as a few with a consumer bent, such as America’s PowerSports Inc., a consolidator of motorcycle, all-terrain vehicle and snowmobile retailers, and MachineryLink Inc., a farm equipment leasor.
Fleming said that he has more experience with consumer goods in his former job with buyout firm Walnut Group, where he managed deals such as Build-A-Bear Workshop Inc. “I have consumer in my DNA, though River Cities does not as much,” he said. Nonetheless, the deal could signal a greater move into the sector for the Ohio firm. “In Cincinnati, there is a wealth of consumer companies.”
Individual investors, including former Proctor CEO Durk Jager, HealthPro’s seed investor, provided the remainder of the round.
HealthPro, based in Cincinnati, closed the round in May, said Todd Wichmann, president and chief executive of HealthPro, and used the proceeds of the fund to purchase the Fit brand of fruit and vegetable wash from Procter at that time.
Wichmann said that Procter launched Fit in 2000, the same year he left the company to become president and co-CEO of Redox Brands Inc., a company set up to acquire branded consumer cleaning products. Wichmann served in a variety of capacities at Procter, including managing the Tide detergent brand in North America.
In 2003, Wichmann launched HealthPro and received a license from Procter for the right to sell Fit. He said that the prospective market was too small for a large company like Proctor and that it would be better off as part of a smaller operation. “They estimated it would be a $50 [million] to $100 million brand, and that’s very small for them,” he said. “But for us, that would be a great return on investment.”
Wichmann said that he began selling HealthPro in 2004. Currently, the product is far from its estimated revenue range, but he said that the company is still seeing sales grow. “We’re up to several million in revenue now,” he said.
HealthPro is targeting Fit at two markets: consumers and institutions. On the consumer side, currently the bulk of the company’s business, Wichmann said that the company is hoping to tap into the small but growing market for people interested in organic products.
On the enterprise side, HealthPro is looking to tackle a number of food providers, including restaurants and supermarkets. It has even make inroads with the U.S. Defense Department for the military.
Unlike many cleaning products that are chlorine- or iodine-based, Wichmann said that Fit includes a mixture of citric acid, baking soda and oleic acid – an ingredient derived from olive oil.
Wichmann said that the company is currently mulling acquiring other branded consumer products, including personal care, beauty, and hard-surface cleaning items.
HealthPro currently has five employees, Wichmann said, and plans to bring another two sales people on board shortly. www.healthprobrands.com