Dive Brief:
- There were 59 mergers and acquisitions globally across the food and drink industry recorded by bevblog.net in May, according to FoodBev Media. Eleven transactions occurred on May 24 alone.
- The largest deal was the $446 million purchase of Nutraceutical International by U.S. private equity firm HGGC. The majority of the remaining transactions were relative small deals.
- The breakdown of purchases by category included: alcohol (10), soft drinks (10), dairy (5) and nutrition (5), with the remaining dispersed among bakery, equipment, frozen food, ingredients, meat and packaging. Overall, 28 of the deals involved U.S. companies.
Dive Insight:
Shifting consumer tastes and eating habits, a rise in small innovative brands, and an uptick in private label sales in recent years have led to revenue stagnation for many CPG categories — and companies. Growth through acquisition has become a core strategy for several food and beverage manufacturers. Other food and drink makers are jettisoning off non-core brands as well.
For some big CPGs, the strategy is one of buying up brands that fortify category positions as well as creating synergies and scalar efficiencies. One such example is J.M. Smucker’s purchase of the Wesson oil brand from Conagra Brands for $285 million. Smucker intends to merge Wesson into a brand lineup that already includes Crisco, and consolidate production into its existing edible oils manufacturing facility in Cincinnati.
Other deals had big CPGs buying up small companies and startup brands in an effort to diversify their portfolios and branch out into healthier and differentiated offers. Dean’s Foods acquired a stake in flax-seed based Good Karma yogurt, giving it a foothold in the high-growth dairy alternative category. Campbell’s invested in meal kit upstart Chef’d while Unilever made a play for meal delivery service Sun Basket.
The trend toward smaller transactions — exacerbated by last month’s 59 acquisitions where none of the deals were more than $500 million — is likely to continue especially as food and drink upstarts scale up to become attractive acquisition targets and bigger brands shop around some non-core assets. But some bigger deals are on the horizon, too. Nestle is looking to unload its candy business, and Reckitt Benckiser is seeking a buyer for its food brands, such as French’s mustard and Frank’s Red Hot sauces.
It will be interesting to see if any bigger combinations transpire in the coming months. Keep an eye on Conagra, Kraft Heinz and Mondelez — all big food manufacturers. Just a few weeks ago, for example, Conagra approached Pinnacle Foods for a possible takeover. Earlier this year, Unilever rejected Kraft Heinz’s $143 billion takeover bid. Mondelez pursued Hershey last summer as a potential acquisition candidate.
Besides Pinnacle, Unilever and Hershey, other names circulating as takeover targets in the past year have included Hain Celestial, with General Mills cited as a likely suitor and Kellogg, whose stock spiked last year on speculation of a takeover by Kraft Heinz or Coca-Cola. It’s probably only a matter of time until the next major deal is announced.