Quality at a fair price. That is David Merage’s motto. The Iranian immigrant came to America in 1966 and, along with his brother Paul, co-founded Chef America, which produced the popular microwaveable Hot Pockets brand in 1977. From the time the Merage brothers founded the company until they sold it to Nestle in 2002 for $2.6 billion, Chef America never once increased the price of Hot Pockets.
Still, even without a price increase, the Merages were able to continuously improve the quality of the product and its customer offering. “We built a corporate culture that was based on higher quality. We wanted to give the customers the best quality while at the same time always looking for ways to reduce cost,” David Merage says.
So when ingredient prices increased, the company would look to its research and development team to figure out a way to offset it. During the brothers’ ownership, the Merages automated processes, looked to build efficiencies and increased advertising budgets. “One year, we needed an additional $6 million for our advertising budget. We asked people within the organization to find the money. That year our team found $7.5 million in waste,” says David Merage, adding that Chef America grew 15 percent annually on average for the majority of the Merages’ ownership period.
It was after this successful experience that David Merage went on to found Consolidated Investment Group (CIG), which invests in real estate, equities and philanthropy (see chart). What’s more, in spring 2012, the Denver-based firm launched a direct private equity investment program to acquire food service companies with up to $5 million in EBITDA. Today CIG is looking to write equity checks of $5 million to $20 million to U.S.-based food companies.