Pop Gourmet CEO on sriracha, Starbucks and life after prison

By Lisa Baertlein

(Reuters) - David Israel's four-year old company, Pop Gourmet, has a deal to sell snacks at Starbucks and a sought-after licensing agreement with uber-hip sriracha seller Huy Fong Foods, but it is his prison time that makes the brand stand-out in a crowded field.

Starbucks Corp (SBUX.O), which helped popularize Kind bars and other snack brands, recently began selling Pop Gourmet in 3,400 U.S. stores. The company, which sells sweet, savoury and low-cal snacks, soon expects to expand its line-up of Huy Fong sriracha-flavoured popcorn, potato chips and croutons with hummus and mayonnaise. It also sells Huy Fong dry seasoning in grocery stores as well as sriracha ketchup.

Pop Gourmet's 2015 sales are forecast to roughly triple from around $5 million last year, said Israel, who has attracted $11 million from investors.

They include former federal prosecutor Ron Neubauer, who first refused to meet with Israel, then changed his mind after reviewing his court case. Neubauer has put in $300,000 and convinced a half dozen friends to follow.

"People love the story," said Israel, 54, who owned a chain of pawnshops when he was ensnared in a prosecution stemming from several Seattle-area robberies in the early 1990s.

Israel maintains that he was not involved. He spent several years and more than $1 million fighting the charges. In 2003, he pleaded guilty while maintaining his innocence.

"I was tapped out," said Israel, who since has declined Neubauer's offer to help clear his name.

"It's not where I want to focus my energy. It's part of my fabric," said Israel, who dreamt up his business plan while in prison.

The Seattle-based snack shop debuted in June 2011 with "the ultimate original big house," inspired by an inmate concoction of microwave popcorn, breakfast cereal, melted M&M's, peanut butter and marshmallows.

"People used to stand in line to get this stuff," said Israel, who served time from August 2003 to June 2007 and now offers jobs and guidance to former inmates.

Neubauer says he expects the company, which has nationwide grocery distribution and offers several products with sought-after natural, gluten-free and non-GMO labels, to get gobbled up by a bigger player.

There were 10 merger and acquisition deals in the snack category in just the first six months of 2015, according to Thomson Reuters data.

An initial public offering seems off the table as China's cooldown spooks U.S. markets. Still, Pop Gourmet rival Amplify Snack Brands Inc (BETR.N), known for its SkinnyPop product, has said it will soon be on the acquisition trail after raising $270 million in its August IPO.

(Reporting by Lisa Baertlein in Los Angeles; Editing by Andrew Hay)