With travel restrictions still in place, Harris Williams professionals are taking advantage of the opportunities afforded by virtual events. Our colleague, Ryan Freeman, a managing director in the Harris Williams Consumer Group, shares key takeaways on the branded food and beverage subsector from his participation in a recent event hosted by BevNET and NOSH.
Why do buyers like the branded food and beverage subsector?
Particularly in food, there are a lot of businesses that have performed well throughout the pandemic and downturn. The space has historically been recession-agnostic, and now it's proven to be pandemic-resilient, too. In fact, many food businesses have significantly outperformed during COVID-19, especially those serving the grocery channel. The expectation among many buyers is that this will continue for the foreseeable future.
What stands out from your conversations with companies in the space?
I was struck by the sheer amount of innovation going on, plus the resulting need for founders and entrepreneurs to raise capital to fuel their growth. For example, the sugar-free trend continues to gain momentum across food and beverage, impacting categories from alcoholic and non-alcoholic beverage to snacks, ice cream, confectionery and many more. Functionality also continues to gain momentum. It’s becoming increasingly specific, aimed at addressing particular need states such as improved gut health and cognitive function. Interestingly, this has created a blurring of the lines between food, active nutrition, VMS and even beauty.
What should potential buyers and sellers be thinking about right now?
Certainly, buyers should be ready for some competition for the best opportunities. We’re seeing a real uptick in activity that we expect to continue, heading into the fall, and strong interest from strategic buyers and private equity groups.
On the other hand, sellers should know that while interest is strong, the bar is also high, particularly for strategic buyers. Large branded food companies are weighing acquiring new brands against investing in their existing brands. Given the way many large food brands have been performing lately, there is greater internal competition for investment dollars than there was pre-COVID-19. That being said, we fully expect strategic buyers to remain active and lead the way coming out of this recessionary period, as they have in the past. We are certainly seeing this in our group: Our last four food transactions were completed by strategic buyers.
Published September 2020