Frontenac Takes a Bite Out of Pet Products Maker Cloud Star
July 16, 2014
By Hillary Canada

Frontenac Co., an early investor in Chipotle Mexican Grill Inc., is betting that health-conscious consumers want to feed their pets the kind of fresh food they feed themselves.

That’s the basis behind the firm’s deal for pet products company Cloud Star Corp., a maker of “all natural” pet treats and products.

Frontenac is one of a number of private equity firms that have sniffed around the pet food industry, which topped $21 billion last year in the U.S., according to industry trade group American Pet Products Association Inc.

Pet food companies including C.J. Foods Inc., I and Love and You and Natural Balance Pet Foods Inc., are among the litany of brands that have drawn interest and capital from private equity firms.

Although Frontenac has historically invested more on the human side of food services and providers, Managing Director Walter Florence said the same trends of health and wellness shaping human food consumption are influencing the pet-care space.

“There’s a long-term trend away from the more preservative-oriented foods to more of the healthy, organic natural treats and foods,” he said. “People are feeding their pets all natural, organic, grain-free, even gluten-free, raw, fresh diets.”

Frontenac knows a thing or two about the desire for fresh food. In 1998, it partnered with McDonald’s Corp. to buy a majority stake in Chipotle, which was then a Denver-based chain with 14 stores and an emphasis on locally grown, organic and sustainable ingredients. The firm sold its interest to McDonald’s two years later, and Chipotle is now a publicly traded brand with more than 1,600 locations.

San Luis Obispo, Calif.-based Cloud Star launched in 1999 with a dog treat made without artificial colors, flavors or preservatives and that is also free of corn, yeast, sugar, salt and soy. The company expanded into a variety of treats as well as grooming items available in health food stores and online retailers including Amazon.com and wag.com.

Mr. Florence said he sees the company growing by getting into more stores, adding new product lines and possibly acquiring other like-minded brands.

The recent decision by retailers Petco and PetSmart to stop carrying pet treats made in China may also ultimately be a boon for Cloud Star, which manufactures its products in the U.S., said Mr. Florence.

Write to Hillary Canada at hillary.canada@wsj.com

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