Private Label Food: Water Lilies and the Opportunity in International Frozen Foods

Key Learnings:

  • Consumer demand continues to trend toward easy, homemade meals that are unique and high quality. 
  • To meet this demand, retailers are looking to create new, differentiated products that match consumer interests. 
  • Private label food manufacturers specializing in frozen and international products are well positioned to capitalize on these trends. 

Several powerful consumer trends are driving growth across the frozen food industry, especially within the on-trend international category. To capitalize on this rising demand, large retailers are expanding their product lines and offerings to include innovative and high-quality options, relying on private label food manufacturers to do so. 

Here, senior bankers from the Harris Williams Consumer Group discuss the key drivers of the frozen food and private label categories and explain why this is creating M&A interest for best-in-class food manufacturing assets. 

Frozen Food’s Growth & Impact on Private Label

Looking to simplify their hectic day-to-day schedules, consumers have long been trending toward fast, ready-made meal options. “This behavior is especially prevalent in those entering their family formation years and wanting easy-to-make foods for kids,” says Alexander. 

The pandemic further accelerated these trends as consumers were forced to cook at home. Unable to eat out, they also yearned for restaurant-quality food and international cuisine that they could quickly make themselves. “Although restaurants have reopened, these behavior shifts have stuck, with demand remaining at elevated levels. As an example of how consumers have brought restaurant-quality foods into the home, the adoption of air fryers as a preferred cooking method has accelerated,” adds Alexander. 

These consumer tailwinds have driven substantial growth in the frozen food segment. Cash points out that brands and retailers have focused on innovation and quality, developing more options across a wider number of categories to better capture rising demand. “This expanding variety of unique meal choices has helped frozen food to play a bigger role in the family menu while appealing more broadly to consumers across age groups,” he says. 

To take advantage of frozen food’s trajectory, major retailers are investing heavily in bringing an ever-growing range of their own private label products to market. The private label segment continues to expand and take share as retailers commit to building powerful brands with high-quality, appealing, and differentiated items within the trending frozen and international food categories. 

Although this shift to private label programs isn’t a new concept for retailers, there’s a substantial evolution taking place. Wilczek explains: “Outside of simply focusing on improved quality, retailers are creating multiple levels of private brands, each with distinct price points and packaging, to entice a wider demographic. This exemplifies retailers’ dedication to the private label space and the opportunity it presents for differentiated manufacturers.” 

Growing Interest in Frozen & Private Label Food Manufacturers

A number of top-performing food manufacturing assets are capitalizing on these trends by specializing in frozen and international food products. Recent Harris Williams client Water Lilies, for example, focuses on Asian appetizers. 

“This category is an especially rapidly growing area that hits on many of the consumer dynamics creating demand,” says Alexander. “Asian appetizers are unique, convenient, handheld, and hearty meals that are gaining additional popularity thanks to advertising pushes from major retailers.” 

Winning manufacturers also focus on private label programs that are benefiting from the market’s overall tailwinds. “To meet current demand, retailers are partnering with private label players like Water Lilies that offer unique and differentiated manufacturing capabilities, coupled with investments in automation, to produce quality products at scale,” explains Cash. 

Through better R&D and innovation capabilities, Water Lilies can create a wide variety of differentiated, on-trend products featuring top-notch ingredients. Cash adds that their forward-thinking approach allows them to offer premium products that national and regional retailers are looking for. “They’re unique in this category as a more advanced private label business that can bring higher levels of innovation directly to their customers,” he says. 

Professionalization, Automation, and Scale Are Key

Across private label food manufacturing, there’s generally a lack of capacity with a substantial amount of demand. Therefore, companies with capacity built through automation and other advanced manufacturing methodologies are poised for growth. 

“In addition, assets that can manufacture quality, differentiated products at scale have the opportunity to establish private label programs with marquee retailers,” says Cash. “These retailers are on the lookout for partners that can reliably fill their shelves and help them tap into the fast-growing frozen and international food segments.” 

Water Lilies is an example of a manufacturer that has successfully maintained high levels of quality and innovation while developing scale. “Due to their flexible manufacturing lines and capabilities, they’re able to more effectively manage changeovers to produce a variety of products and pack sizes for customers,” says Wilczek. “Investments in automation have also enabled increased throughput, offsetting the impacts of rising ingredient and labor costs.” 

Alexander says one effective M&A angle is to find a successful food manufacturer with high-quality products and bring more professionalization, automation, and scale to their production capabilities. “There’s also potential to invest in on-trend segments of private label food manufacturing,” he adds. 

These pockets of opportunity, like private label frozen international foods, are primed for continued growth. Investors can take a business in one of these categories, whether a private label, frozen, or international food platform, and expand it into complementary product categories. 

Establishing a private label food platform as a trusted supplier to retailers is also a proven strategy. “These companies can leverage such relationships to broaden their reach within both core and adjacent product categories, becoming a true long-term, value-added partner to their retail customers,” says Alexander. 

Differentiated Success

With consumer preferences shifting to unique and convenient home-cooked meals, food manufacturers specializing in frozen international and private label products are well positioned for strong long-term growth. The most successful will leverage flexible manufacturing and innovative R&D capabilities to bring differentiated and on-trend products to market at the scale retailers demand. 

Beyond private label food manufacturing, the Harris Williams Consumer Group has wide-ranging experience across other high-value subsectors. 

To learn more, please contact our senior bankers. 

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