Sonoma Brands reinvents grocery ‘snack section' with gourmet marshmallows, soup, chips

In January 2015, Jon Sebastiani sold his five-year-old Sonoma-based Krave Jerky to Hershey for an estimated $200 million. The company, with $36 million in 2014 sales, had taken off in the $2.5 billion dormant dried-meat snack category with newfangled flavors such as cabernet-rosemary and chardonnay-thyme.

The reinvigorated jerky made it into Whole Foods, 7-Eleven, Safeway, Target and Kroger markets, as well as into Four Seasons mini-bars and Virgin America planes.

After the sale, Sebastiani launched Sonoma Brands, a venture-capital company aimed at specialty foods.

Now he’s back in the saddle with investments and new companies he launched in the past year.

A triathlete and ski racer, Sebastiani is recovering from a skiing injury that required knee surgery.

“I was skiing down a beautiful, fresh, heavily moguled mountain about a month ago up in Tahoe, enjoying every part of this glorious winter,” he said in a Feb. 28 interview with North Bay Business Journal. “I put my pole down expecting some resistance. I got no resistance, lost my balance at about 20 miles an hour. I flipped my right tip and ripped my ACL (anterior cruciate ligament). I’m on the mend,” he said, after surgery on his right knee.

While recuperating from injuries, he’s exercising his business savvy. “I’m in the office,” he said. “I go stir-crazy at home. I have my leg up. I had to cancel the Ironman I was doing in San Diego in April.”

The year-old Sonoma Brands launched two brands. One company called Smashmallow is growing even faster than Krave did.

“It’s a reintroduction of the marshmallow in an organic, fun manner,” Sebastiani said. “This is a category everybody in America knows. Everybody has a fond memory” as a kid of roasting marshmallows over campfires until they toast golden or making s’mores, a graham-cracker sandwich of marshmallow and melted chocolate. Marshmallows also were traditionally melded with crispy rice, and used to sweeten yams or top hot chocolate.

“We have turned it on its head and given it great flavors,” Sebastiani said. Seven flavors include Meyer-lemon chia seed, mint chocolate chip, toasted coconut pineapple, strawberries and cream, root-beer float, espresso bean and cinnamon churro.

“The term ‘snack section’ is emerging,” Sebastiani said, noting that the Smashmallows go into small snack bags that sell for $4. The product contains no corn syrup, and is made from organic cane sugar, tapioca syrup, gelatin, corn starch and various flavorings and seasonings.

“We have positioned them right alongside cookies, brownies, RedVines (red licorice), any other sugar snacks,” he said. “Hey, these are better for you. This will create a far more enjoyable s’more than just your typical vanilla.”

Admitting a persistent sweet tooth but conscious of his health as an athlete, Sebastiani sought to create a healthier sweet. At the start of a race to kick his energy into high gear, “I would find myself reaching for a marshmallow,” he said, in part because they have no fat. “That would satiate my sweet tooth, but it wouldn’t load me up with a ton of calories.”

Traveling in Paris after the Krave sale, he noticed that many French bakeries had unusually flavored marshmallows as a “snackable delicacy. That was my epiphany,” he said. “I like to start businesses that make sense to me.”

Sebastiani brought the treats to America and started Smashmallow.

In half a year, he used his Krave Jerky connections to get Smashmallows into several thousand stores.

“We are nationwide in REI (Recreational Equipment Inc.) and in Kroger,” he said, along with other major retailers nationwide. “It’s all based right here in Sonoma,” he said, with 30 employees, most of whom are sales staff located in other states. By the end of 2017 he expects revenue at an annual rate of $8 million.

“I am a private-equity or venture-capital fund,” he said of Sonoma Brands. “Having capital that is deployed into these brands that I’m starting allows me to build teams,” Sebastiani said.

He invested in Dang Foods, a Berkeley-based company that makes chips out of coconuts and onions, and has annual sales nearing $20 million.

Sonoma Brands owns 15 percent of Dang, which was founded by Vincent Kitirattragarn, 30, an engineer who lives in Oakland and was educated at Cornell. Dang products are already in Safeway, Whole Foods, Sprouts, and Amazon - some 2,000 stores.

“When we invested, they were doing $6 million,” Sebastiani said. “That will show a shifting of branding strategy. We have tripled their business. They get access to all of our people if they need help on the supply chain or designing a social-media marketing campaign, hiring a new VP of sales.”

Züpa Noma is the third Sonoma Brands company, with 2017 sales expected at about $3 million.

“If you’re from Sonoma, we call it Noma,” Sebastiani said. The company makes half a dozen flavors of bottled soup with exciting flavors such as beet-orange basil, cucumber-avocado fennel, tomato gazpacho, carrot-coconut lime, tomatillo jalapeño and yellow-pepper habanero. Each bottle has 12 ounces and is pasteurized under high pressure. The vegetables are fresh, uncooked.

“That is turning the soup industry on its head,” Sebastiani said. Ayesha Curry, a chef and television personality who lives in Walnut Creek with her NBA-star husband, helped with promotion and branding of Züpa Noma. She is a partner in the company and “helps tell our story,” Sebastiani said.

“We want to compete against juice,” Sebastiani said. “America thinks they’re being very healthy when they buy a $5 bottle of fresh-pressed fruit juice.” But even freshly juiced fruit might contain some 50 grams of sugar in a bottle.

“This is a convenient, chilled superfood soup on the go,” he said, “a meal replacement. Souping is using all vegetables. We include the skins and seeds” to boost fiber.

The idea for Züpa Noma also came from his trip to Europe, where gazpacho was sold everywhere. “There was gazpacho in restaurants, in gas stations. Europeans were buying gazpacho as their beverage of choice to stay healthy,” he said. “Instead of eating your morning muffin, swap in soup.”

“We’re actively negotiating with a number of other companies,” Sebastiani said. “In the next couple of months, we will be adding investments to our portfolio.”

James Dunn covers technology, biotech, law, the food industry, and banking and finance. Reach him at: james.dunn@busjrnl.com or 707-521-4257