California’s Central Valley Fund Invests $3.5 Million in La Michoacana

Central Valley Fund, the Davis, CA.-based private capital firm, has committed a preferred stock investment of $3.5 million in Paletería la Michoacana, a California producer, distributor and marketer of ice cream and desserts catering Hispanic consumers. La Michoacana, which takes its name from the popular Mexican chain of ice cream parlors, started in 1991 as a modest plant in Turlock, California. Founders Ignacio Gutierrez and wife Patricia have grown the family business into one of the fastest-growing producers and distributors of ice cream, growing 25% to 30% annually in the past five years. The company moved in 2002 to a bigger plant in Modesto, CA.

Patricia Gutierrez tells Portada that the bulk of the investment will be used towards expanding the business beyond the Southwest, where the company has a strong presence, and to grow nationwide, mostly through distribution across a wide variety of food and grocery retailers, including Safeway, Costco and Kroger. La Michoacana specializes in the production and distribution of Mexican-style frozen treats (paletas) and related ice cream products with flavors including coconut, arroz con leche, guava, walnut, etc.

Unlike La Michoacana branded ice-cream chains in Mexico that have grown through the establishment of franchises or small retail outlets, La Michoacana in the U.S. is focused mainly on growing through distribution in large chains. Today the privately owned company covers local and mainstream grocers and warehouse club stores in California and Texas. “We spend very little in marketing and advertising,” says Gutierrez, who adds confidently the brand has grown mostly through word-of-mouth. The company does not employ advertising or P.R. firm and is not planning on doing so in the near future.

La Michoacana does not disclose financials. But ice-cream is big business in the U.S.: According to the International Ice Cream Association, sales of ice cream and related frozen desserts were over $21 billion in the U.S. in 2008 (the last year for where statistics are available.) Segmenting the market further, supermarket sales (excluding convenience stores, big-box retailers, etc.) of frozen novelty products accounted for approximately $2.4 billion of the “at home” total, up approximately 1.6% compared to the prior year.