Top executives at the Strauss food company must have been overjoyed when Justin Timberlake performed in Israel last month. Not because they are necessarily fans of his music, but because his trip played prominently in gossip columns around the world. As usual, the media hunted for tidbits about the demands the singer made of his local producers and, in Timberlake’s case, they included whiskey, air filters - and a vegetable tray with a hummus dip.
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The average Israeli might think that ordering up a plate of hummus was just a goodwill gesture for the locals. But the truth is that Timberlake is one of tens of milions of American who have developed a liking for the Middle Eastern chick pea paste.
Regarded as healthy, in addition to being fashionable and trendy, hummus has taken off in America. No less than 26% of American say they have it in their refrigerators and 70% are familiar with the product. Consumer spending on hummus has reached $1 billion a year, after growing some 18% a year over the past five years - six times faster than the overall growth of the American food market.
Americans still don’t eat hummus on a plate as a course in itself; like Timberlake, they view it as spread or dip. Hummus stars in supermarkets all over the United States as well as in the best restaurants.
Google Trends provides a good perspective on hummus mania: In 2004, the chickpea dish had only a 21 point search score, while salsa sauce had 67 points. Within a decade, hummus had taken the lead. Today, the score for hummus is 68, compared to 57 for salsa. This is true on a worldwide basis, too, but if we consider just the U.S., the interest in hummus and chick peas is growing steadily.
Singer Katy Perry says the dip is one of her backstage necessities, along with granola and fruit, while Lady Gaga says there’s no such thing as too much hummus.
And what does all this have to do with Strauss? Not only is the Israeli food maker riding the hummus wave in America, but many say Strauss created the wave when it bought a small company called Sabra in 2005. Sabra has subsequently become a hummus superpower, beating even the U.S. giant Kraft Foods. Today, Sabra controls nearly two-thirds of the American hummus market.
“You can only be in the right place, with the right product and with the right partner a few times,” says Giyora Bar Dea, the CEO of PepsiCo-Strauss Fresh Dips & Spreads, the 50-50 joint venture with the maker of Pepsi Cola that produces Sabra hummus and other products. Hummus has longed ceased to be a niche product used by Arab and Israeli immigrants and a few Zionist-American Jews.
Strauss’s most successful product of the past 20 years got off to an inauspicious start. Sabra was founded in 1986 by Zohar Norman, an ex-Israeli who was working as a cab driver, along with members of the Yanko family, who at the time owned the Tzabar brand of packaged salads and spreads sold in Israel. Norman established the business in the U.S., buying access to the Yanko family’s know-how and the use of the brand name (Tzabar and Sabra both refer to a type of cactus plant and are colloquially used as a reference to native Israelis.)
Norman began hummus production in a small warehouse in Brooklyn. His approach was not much different from that of other hummus producers on the American East Coast, but his clientele was almost entirely confined to Israelis living in the U.S., nostalgic for the tastes of home. Annual sales amounted to around $1 million. The Yanko family lost interest in the American venture and in 1992, Norman bought out his partners.
It didn’t take long for Norman to recognize that he needed a partner and one wasn’t long in coming in the person of Rabbi Yehuda Pearl, who then owned both a kosher grocery and bakery in New York and Blue & White, a distributor of Israeli food in the American market. In 1994, Pearl bought a 50% stake in Sabra, giving Norman an entré to major American retailers. Together, the pair was able to boost sales of the Sabra brand to $7 million annually in eight years.
Ultimately, however, a rift developed between the partners. Norman tried - but failed - to persuade Osem Food, which had bought the Tzabar brand, to buy Pearl’s share in the company - a move that Gezi Kaplan, who later became Osem’s CEO, later admitted was a colossal mistake.
In the end, it was Pearl who bought out Norman in 2002 and set Sabra on its growth trajectory beyond the Jewish and Israeli markets in the U.S. to America’s main street. Its product offerings were expanded, packaging was redesigned and sales jumped, but Pearl understood that he needed a partner with the financial, managerial and production assets to really exploit the opportunity that the brand represented.
With sales growing at 50% a year, Sabra needed to move out of its space in New York’s Queens. Pearl turned to Strauss CEO Michael Strauss, who had been considered introducing its Achla brand of hummus and prepared salad products in the U.S. He had looked at Sabra before Pearl joined the business, but Strauss didn’t like the management culture at Sabra and the matter was dropped.
Pearl approached Strauss to reconsider. According to knowledgeable sources, the Strauss CEO had his hands full with his company’s merger with Elite, the chocolate and coffee company, and with the expansion of Strauss’ own global coffee business. Pearl was persistent, however. He had managed to boost sales to $22 million by 2004, which convinced Strauss of Sabra’s potential. In 2005, Strauss bought a 51% stake in the company for $8.8 million.
The company was still oriented toward the Jewish market and saddled with an antiquated production line. With a few changes, Sabra’s sales climbed 55% in the first year under Strauss. But Strauss knew the hummus market had greater things ahead of it and, just as importantly, he realized it had no major competition for the American palate.
At the same time, Strauss was approached by Pepsico, which was its partner in a snack food venture based in the southern Israeli town of Sderot. Pepsico was interested in Sabra producing hummus under its own Stacy’s Pita Chip brand name, but the executives at Strauss had their own plans. Chairwoman Ofra Strauss and the company’s CEO at the time, Erez Vigodman, wanted to do the reverse: Rather than give hummus a supporting role to pita chips, the chick pea dip would be the star.
Ofra Strauss came to Pepsico’s offices with a cooler full of Sabra products and presented them to CEO Indra Nooyi and two of her senior executives - Jerusalem-born Palestinian Saad Abdul-Latif, who was Pepisco’s head of operations for Asia, the Middle East and Africa, and Zain Abdullah, the head of Pepsico Europe.
Pepsico comes onboard
In December 2007, Pepsico acquired Pearl’s 49% stake in Sabra and another 1% from Strauss for $50 million. It was an unusual partnership for Pepsico because it did not take control of the venture. But, with the PepsiCo name attached to the enterprise, major American retailers such as Wal-Mart and Costco were soon eager to have the product.
“The chains were looking for new money at the cash register,” explains Bar Dea, CEO of the Strauss-Pepsico joint venture. “When you bring in a new brand of chocolate, chances are its sales will be at the expense of existing brands, but when you offer a wholly new category, it brings in new money.”
With sales growing by double digits, Sabra embarked on construction of a $68 million plant in Virginia capable of producing 4,000 tons of the product - 20 times the capacity of Pearl’s Queens facility. The new facility was dedicated in 2010.
Although the first step in the strategic plan of the joint venture simply involved getting the product on supermarket shelves, the next step was a promotional campaign. Instead of launching a television ad blitz, the company sent trucks out to 11 American cities, distributing two million samples between 2008 and 2010. When the Virginia plant came on line, another 12 million samples were distributed in 28 cities around the U.S.
The company also developed a range of 25 hummus flavors, including hummus with spinach and artichoke and hummus with basil and pesto, that went well beyond Strauss’ Achla brand sold in Israel.
Nine years later, Sabra is the undisputed U.S. hummus hegemon, with sales that reached $314 million last year. Over the past two years, the company has begun selling hummus in Canada, and has entered the market in Mexico and Australia as well, where it is marketed under the Obela brand.