This is an intriguing time to be involved in the global food and beverage industry. 2019 remains promising for M&A opportunities for several reasons. Giant food companies are on a spree to expand their portfolios with food innovation. Food start-ups and smaller private food companies are looking to cash in on growth and exit strategies. And private equity and venture capital firms are motivated to get their piece of the pie.M&A Activity
In 2018, there were 276 M&A deals closed, with nearly 70 percent of deals completed by privately owned buyers. Throughout last year and the first quarter of this year, several high-dollar transactions have taken place:
- In the U.S., Conagra Brands purchased Pinnacle Foods for $8.1 billion, creating the second-largest American frozen food company.
- South Korea’s CJ CheilJedang purchased a majority stake in a top U.S. food business, the Schwan Food Company Inc., for $1.8 billion.
- Parmalat Canada, Inc acquired Kraft Heinz Canada’s natural cheese business for $1.2 billion.
- U.S.-based Campbell’s Soup Company purchased Snyder’s-Lance for $6.1 billion.
- Tokyo’s publicly traded Fuji Oil Holdings Inc. acquired North American family-owned Blommer Chocolate Company, the world’s third-largest chocolate ingredient manufacturer, for $750 million.
- The British-Dutch company Unilever made several acquisitions, includingCalifornia’s OLLY Nutrition company, London’s healthy snack brand Graze, meat-free food company The Vegetarian Butcher, health drinks brand Horlick’s India, and the Romanian ice cream business Betty Ice.
- Coca-Cola purchased Britain’s Costa Coffee chain for $5.1 billion.
- Nestlé, the world's largest food company,paid $7.15 billion to Starbucks for the rights to sell the chain's products in stores worldwide. It also sold its American candy business to Ferrero Group for $2.8 billion.
A slew of various trends are driving the robust activity surrounding the food sector.
- There is a significant demand for health-based foods. Plant-based and animal-free foods are gaining popularity as consumers are choosing to eat less meat.
- Organic foods and clean label foods are drawing a larger focus as consumers are demanding more transparency regarding what it is in their food and how it is produced.
- Online food companies continue to develop more convenient and healthy ways for shoppers to enjoy delivery services. Instead of dinner and a movie, consumers are opting for delivery and Netflix.
- Sustainability is on the menu as the war on plastic gains momentum and the demand for innovative eco-conscious packaging grows.
- Millennials are driving a demand for craft beer pairings, the infusion of alcohol into foods, and artisanal snack foods as a replacement for meal occasions.
- Cannabis in the form of CBD oil is making its way into food and beverage formulations, including cocktails and coffee drinks.
- New strains of probiotics are making it possible for shelf-stable probiotic foods to emerge as a popular healthy choice.
- Consumers are craving new flavors and ingredients, creating new opportunities for brand expansion. This includes global cuisines enjoyed at home, more complexity of spicy varietals, and the use of more fermented foods. Specifically, Pacific Rim flavors are a top trend this year.
There is no ignoring the question of how the ongoing trade war between the United States and China might be impacting the food industry. The overall situation has the potential to influence M&A in this sector. However, the trade war has yet to derail the global economy and M&A activity still faces a positive outlook. Even under a threat of a recession, M&A deals are predicted to hold steady. Private equity firms still have plenty of capital on hand. Interest rates remain low. Big food companies remain focused on investing in growth, and consumers’ eating habits keep changing.
It is important to keep in mind that the overall food industry is composed of many smaller individual sectors, with some being less affected by trade talks than others. For example, the prepared foods business is high margin and less susceptible to commodity swings.
A view of the situation from another perspective indicates that Canada, Mexico, Japan, and countries in the European Union and Southeast Asia could actually be benefiting from the ongoing trade conflict.
Time to Act?
If you are excited to seize the moment in the evolving food & beverage industry, contact us at Benchmark International so that we can put our global connections to work for you.
Americas: Sam Smoot at +1 (813) 898 2350 / Smoot@BenchmarkCorporate.com
Europe: Carl Settle at +44 (0)161 359 4400 / Settle@BenchmarkCorporate.com
Africa: Anthony McCardle at +2721 300 2055 / McCardle@BenchmarkCorporate.com
ABOUT BENCHMARK INTERNATIONAL
Benchmark International’s global offices provide business owners in the middle market and lower middle market with creative, value-maximizing solutions for growing and exiting their businesses. To date, Benchmark International has handled engagements in excess of $5B across 30 industries worldwide. With decades of global M&A experience, Benchmark International’s deal teams, working from 13 offices across the world, have assisted hundreds of owners with achieving their personal objectives and ensuring the continued growth of their businesses.