Stories, trends, deal makers and breakers, investors and seekers. Read about PE investment deals, M&A, capital markets and business in general, right here!

vegan-market

Acquirers in the F&B sector are taking a measured approach to M&A with fewer deals announced this year compared to 2018. According to William Blair’s 2019 Investment Banking report, consumers are redefining the market as they lean towards on-trend options…

Acquirers in the F&B sector are taking a measured approach to M&A with fewer deals announced this year compared to 2018. According to William Blair’s 2019 Investment Banking report, consumers are redefining the market as they lean towards on-trend options such as better-for-you foods, protein-rich snack products, and plant-based foods. Duff & Phelps reported that deal activity this year is being driven by strategic buyers (including bolt-on deals) and strategic transactions represent over 90 percent of the total deal flow in the space. Of these deals, 70 percent have been completed by privately owned buyers. These strategic transactions are a result of companies racing to stay relevant to a consumer whose tastes are evolving quickly. Consumers are spending a lot more time reading the label on the back of their purchase, and this in turn is catalysing the transformation of the industry.

For example, the number of vegan consumers in the world has increased, driving up market demand for alternatives to meat and dairy. The global vegan food market value is estimated to reach USD 24.3 billion by 2026, registering a CAGR of 9 percent. This is fuelling the growth of the plant-based food market. Ingredion recently made about USD 140 million in strategic investments, aimed at manufacturing and supplying plant-based protein solutions to support increased global demand. In February 2018, it purchased a facility in Nebraska to produce pea protein isolates for the nutrition, health and wellness categories. The company also entered into a joint venture agreement with Verdient Foods, Inc., a Canadian company, to make pulse-based protein concentrates. Similarly, companies such as Beyond Meat and Impossible Foods (which recently raised USD 300 million at a USD 1.5 billion valuation), are working to cater to this rapidly growing market. Established players such as Tyson and Nestle are also developing products for this space. The global market for non-soy, gluten-free plant-based proteins is projected to be USD 1.5 billion by 2022 and companies are racing to acquire businesses that cater to niche paleo, vegan, keto, gluten-free and dairy free markets.

Larger firms are divesting non-performing assets to focus on segments such as health and functional foods and snacks that continue to show growth potential. Campbell divested several assets recently in order to focus solely on its snacks, meals and beverage businesses. Single-serve and better-for-you snack products are finding many takers in the grocery aisle. Smaller, newer food companies are driving innovation to bring healthier options and multicultural flavours to market. Businesses are looking at fermented and gut-friendly foods as the next big trend to hit the market. Mordor Intelligence has reported that the fermented food segment is expected to reach a CAGR of 8.7 percent from 2018-2023, due to increasing consumer interest in health and wellness, and a growing awareness of the benefits of probiotics. Asia is one of the fastest-growing market for most fermentation applications.

Consumers are increasingly conscious of not only what goes on their plate, but also the journey that it undertook to get there. The market is turning away from established brands in favour of emerging value-oriented private label options. This is why locally and sustainably sourced, simple foods are finding popularity with younger consumers and gaining serious shelf space as a result. Research has found that consumers are willing to pay more for sustainably sourced or sustainably produced consumer products. The next few years will see the industry refocusing capital towards promising growth opportunities that focus on functional foods, sustainability, and health and wellness products.

________________________________________________________________________

Image source: Pixabay

If you are a firm/advisor in the food & beverage sector looking to get introduced to a prospective buyer/investor, sign up here. To gain access to a wide selection of curated M&A deals in the F&B space, sign up for a free trial on BankerBay.

Comments