Workers add a coconut coating to baked goods at the Sweets from the Earth manufacturing facility in Toronto, on Monday.Galit Rodan/The Globe and Mail
The private equity arm of Fengate Asset Management is pushing into the fast-growing market for healthier snacks by acquiring Toronto-based Sweets from the Earth, with plans to take more of the company’s treats to the U.S. market.
Fengate bought a majority stake in Sweets earlier this summer, taking control of the family-led business that bakes and sells more than 2,000 varieties of plant-based, allergy-friendly sweets such as cookies, energy bars and cakes.
Sweets founder and co-chief executive officer Ilana Kadonoff and her brother, co-CEO Marc Kadonoff, are keeping a sizable minority stake and will continue to run the business with Fengate.
The companies did not disclose financial terms, but Fengate typically makes private equity investments of $15-million to $50-million in companies with as much as $15-million of earnings before interest, taxes, depreciation and amortization (EBITDA). Fengate also invests in real estate and infrastructure, with $24-billion of assets under management.
Canada’s founder-led businesses are increasingly turning to private equity for funding to propel their next level of growth – and to chart an exit plan when the family owners are ready to step away. That has expanded the pool of mid-market acquisition targets even as the broader private equity sector struggles through a period of sluggish deal-making.
Fengate has tracked the $2.7-billion Canadian bakery market for the past four years, especially the “better-for-you” segment, which is growing 6 to 8 per cent annually.
Blueberry muffins being made at Sweets From the Earth.Galit Rodan/The Globe and Mail
Two trends have driven that expansion: an increasing number of people want to eat healthier food, and the rising demand for inclusive treats that cater to restricted diets and allergies.
“I think about the child at the birthday party whose mom has to bring a lunchbox with a gluten-free cupcake,” Jennifer Pereira, Fengate’s group head of private equity, said in an interview.
“They can go to a party and everybody’s eating the same thing, and if you’re kosher, or if you’re halal, or if you’re vegan, it doesn’t matter. There’s an option that everybody can enjoy,” she said. “And by the way, it tastes really good. As we know, this category doesn’t have the strongest reputation for taste.”
Fengate also acquired food producer Saco Foods for an undisclosed sum last year. It is managing both the Sweets and Saco investments as part of a partnership with the LiUNA Pension Fund of Central and Eastern Canada, which serves construction workers.
The seed that led Ms. Kadonoff to found Sweets from the Earth in 2002 was planted in the 1970s. Her father shot a rabbit while hunting with a neighbour, and they cooked a pot of rabbit stew. She was only seven years old, but soon swore off meat and had to learn to cook her own vegetarian dishes when she wouldn’t eat the family’s meals.
Jennifer Pereira, left, head of private equity at Fengate Asset Management, and Ilana Kadonoff, right, founder, president and co-CEO of Sweets From the Earth at the company’s manufacturing facility in Toronto.Galit Rodan/The Globe and Mail
As an adult, Ms. Kadonoff was searching for a career change and took a leave from her job in health care to go to pastry school in Vancouver. As she gained a toehold as a chef, she found she was baking with animal ingredients but increasingly turning to a vegan diet.
“I started experimenting,” she said. “Vegan baked foods were not a thing 23 or 24 years ago.”
She built her customer roster by taking samples to natural food stores and restaurants, baking at night while working a day job. She launched Sweets in 2002, and her brother bought half the business in 2008 and took over marketing, sales and finances. The company expanded quickly.
By 2024, Sweets from the Earth was among the top growing companies compiled by The Globe and Mail. Based on 2023 data, it had revenue of $10-million to $25-million, up 113 per cent over three years.
But it lacked a proper sales team, relying instead on inbound calls. It had customers in the U.S. and orders from Britain, the Philippines and Saudi Arabia, but only a small percentage of its sales were abroad. The Kadonoffs ran the business conservatively, with virtually no debt, and needed a longer-term plan.
“Our children didn’t want to come into the business, so, in addition to growth … succession planning definitely was a key consideration,” Mr. Kadonoff said.
Fengate is providing funding to build a sales team and to ramp up sales in the U.S. and other markets, in part by hunting for acquisitions in a market for healthy baked goods that is still fragmented and poised for consolidation.
Sweets from the Earth’s products comply with the United States-Mexico-Canada Agreement (USMCA), which has so far helped it dodge tariffs, and a weaker Canadian dollar has actually helped boost margins.
“What excites Fengate is that there’s plenty of growth right here in Canada, and we see the U.S. as an additional upside,” Ms. Pereira said.