Is an investment in Cozzini Bros. a good investment?

Posted by Louis Collini on Jan 25th 2020

As owner of New Jersey Grinding, a small knife sharpening rental service in New Jersey, when I heard about the Cozzini Brothers selling to Audax Private Equity firm I was impressed how they had truly made their business so successful. As they grew I felt the impact through the loss of many of my chain restaurants and food service accounts that were nationwide. They had taken over the Chipotle's nationwide while we were servicing all of the New Jersey stores as an example. I actually thought the business model was solid and I considered being a part of it by selling my business for an equity position. 

After the sale to Birch Hill Equity the growth seemed to diminish and now I wonder if it might be trending downward. Since it is a private company I do no have access to financials as a public company would disclose but my experience in the industry is seeing a desperate company. The original model as told to me by Robert Ambrosi, who sold his business to Cozzini and headed the north east division, was that they would grow by acquisition and national partnerships. This would be how they can keep revenue, and profit margins high. He told me specifically that they would not start price wars since it would not benefit investors and hurt further potential acquisitions. 

For most people they never knew that the knife sharpening service even existed but for people that grew up in that business it seems like everyone they know is in it. It is a very close knit group with the same suppliers and in some cases the same last names since the origin is from a small village in Italy. Needless to say Cozzini is often a topic of discussion.

 For a few years you only heard about the chains that they have gotten a contract for and businesses that have sold out to them, but lately you hear more about chains that have been lost either by store closings or by using other methods  to keep their knives sharp. And you hear about owner operators that need a more personalized service, that Cozzini just can't provide, looking for another sharpening company. 

Now we hear about sales teams going door to door soliciting accounts and doing exactly what I was told they would not do. They are offering customers service at any price they need to get the account. Their typical price structure would be about $3.50 every two weeks per knife is now becoming $2.00 every two weeks per knife. I believe they think that this will be a short term cost to acquire customers and that they can increase pricing down the road. The reality is that with all these sales teams they have had very little success and the retaliation from businesses that in some cases have been in existence for generations has caused them to loose there existing customers for price and quality reasons. They have their customers sign short term contract but from what I hear many customers have said they are not going to renew the contract but go with another company.

Since private equity companies tend to have a lack of transparency for investors I think a conversation is helpful. I would like to hear from you. Whether you agree or disagree, would like to add something or have questions please email me at sales@cutlerymania.com. If you want I will add your comments to this blog.