Dive Brief:
- The number of CPG exits has more than tripled over the past few years, increasing from less than 50 exits in 2011 to more than 165 exits of private CPG companies in 2015, according to CB Insights.
- Driving this increase is major manufacturers buying up smaller competitors that either were taking away market share or position the larger company's portfolio in a fast-growing market (or both).
- The most active acquirer in the past five years was Anheuser-Busch InBev with 15 acquisitions of private companies from Q1 2011 to Q1 2016. DS Services of America, a water-focused beverage distributor, was the next most active acquirer, having purchased almost 10 smaller water brands since 2011.
Dive Insight:
While larger CPG companies tend to be the most active acquirers in this area, private equity and other investment firms are also becoming more active. BBX Capital ranked No. 10 on CB Insights' list of most active CPG acquirers in the past five years after the company's string of small candy and chocolate brand acquisitions, such as premium chocolate maker Williams & Bennett in 2014 and Kencraft Candy's assets in 2015.
But it's not just smaller brands these financial companies are after. 3G Capital has played a role in consolidation at the top of the industry, having purchased Heinz in 2013 and then merging it with Kraft in 2015 to create the fifth-largest food and beverage company in the world. There's speculation 3G could be in the market for a General Mills takeover next, according to a recent Citigroup report.
Other deals, such as Snyder's-Lance and Diamond Foods and the potential AB-InBev-SABMiller merger, demonstrate that more consolidation is still upon the top of the industry.
M&A will still be prevalent among smaller and middle-market companies that attract investments or acquisitions by major manufacturers and financial firms. But it's not likely 2016's M&A activity will top or reach 2015's total numbers. According to CB Insights, CPG exits have slowed down so far this year compared to 2015, but 2016 exits could still be on target to surpass 2014's total.
One reason for the slowdown is purely mathematical — 2015's total M&A value was inflated by the Kraft Heinz deal and the announced AB-InBev-SABMiller merger. These needle-moving "mega deals" are far less common in the industry, even with consolidation in the upper echelons.
M&A is down not just in food and beverage but across the board, with first quarter 2016 total M&A volume for U.S. companies falling 38% year over year, according to Dealogic estimates. This could signal shifts in the state (or perception) of the economy or the impact of the Federal Reserve's decision to raise interest rates for the first time in seven years, among other factors not exclusive to the food and beverage industry.