What We’re Seeing

Market Update1

Recent M&A activity in the food and beverage industry has slowed given concerns over the COVID-19 outbreak, with announced transactions declining approximately 35% in March over the same period last year. Despite the slowdown in M&A activity, there were a few recent notable food and beverage transactions. Ingredion announced it will acquire a 75% stake in PureCircle, a producer and distributor of stevia sweeteners and flavors. Grecian Delight has merged with Kronos Foods, combining two providers of specialty proteins and globally inspired foods. PepsiCo announced it will acquire Rockstar Energy Beverages, a producer of energy drinks, for $3.9 billion.

What We’ve Been Doing

Closed Harris Williams Transactions

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Tracking COVID-19

Across the United States, COVID-19 is altering consumer behavior and significantly disrupting business as usual. Stay-at-home orders have been issued in all but five states, causing businesses to temporarily close, pivot operations, and/or change the way they interact with customers. Among those industries most impacted has been food service, which has seen an unprecedented slowdown as a result of restrictions on dining in. Not all is dire, however: grocery retail and off-premises food service have experienced significant growth.

Mandated Dine-In Closures are Hurting Restaurants

According to The NPD Group, approximately 97% of restaurants in the U.S. are now under some level of restrictions due to COVID-19. Transactions at quick-service restaurants were down 40% in the week ending March 29, 2020, relative to a year ago, whereas transactions at full-service restaurants declined 79%. Full-service restaurants are working diligently to establish off-premise platforms through delivery, third-party delivery, and curbside pickup to ease the burden. 

Access the full article here.

Processed Food is Making a Comeback

According to GlobalData, 83% of global consumers are concerned about COVID-19 and 62% expect the situation to worsen. Consumer uncertainty has significantly affected consumer preferences in favor of alcohol, snack foods, and tobacco products. In addition, processed foods, pasta sauces, and cereal brands have experienced significant demand increases, benefiting large food companies such as Kraft Heinz, Conagra Brands, and General Mills. “We’re seeing consumers crave comfort and convenience as they are making more meals at home,” said Kelsey Roemhildt, a spokeswoman for General Mills.

Access the full article here.

Grocery Retailers Continue to See Increased Demand

Since early March, grocery retailers have experienced unprecedented demand along with shifting consumer buyer behaviors. According to the IDDBA, center store food sales are up 29% for the week ending April 5, 2020, over the comparable week in 2019. Led by meat department growth of 41%, the fresh store perimeter continues to experience growth at nearly 16% for the week ending April 5, 2020. While most departments continue to experience sales lift over similar periods of 2019, not all areas of the grocery store are growing. Sales in the deli and in-store bakery departments were both down approximately 23% for the week ending April 5, 2020. These declines are partially a reflection of lower demand for celebratory in-store bakery items like cakes, curtailed consumption of prepared foods, and deli counter and self-service offerings being temporarily closed.

Access the full report here, updated weekly reports are posted here.

Manufacturers and Distributors are Shifting Focus to Retail

Manufacturers such as Tyson Foods, Sanderson Farms, Cargill, Perdue Farms, and Kraft Heinz are shifting manufacturing operations to meet the surge in demand for retail products. Cargill Protein told Food Navigator that demand for meat and poultry products in retail and food service is typically split 50/50, but shifted to 85/15 by the end of March. Food service distributors are also looking to shift operations to meet consumer demand. The International Foodservice Distributors Association and the Food Industry Association recently announced a partnership that will match food service distributors with excess capacity to assist food retailers and wholesalers that require additional resources.

Access the full article here.

Protein Processors are at Risk of Shutdown

Industry officials are saying protein production has been reduced by as much as 25% due to forced slowdowns and closures at some of the country’s biggest meat processing plants because of sick workers. Two of the seven largest U.S. facilities, each with capacity to process 5,000 beef cattle daily, are closed because of COVID-19. The meat supply chain is especially vulnerable to COVID-19 because processing is increasingly done at a handful of large plants.

Access the full article here.

Vital Signs

Restaurant and Grocery Store Sales Indices4

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Consumer Food Price Index Inflation2

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Key Trading Statistics1

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Public Equity Market Overview

Public Company Sector Performance (Median One Year Change in Stock Price)1

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Recent Equity Offerings5

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Food and Beverage Industry Stock Performance Index4

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M&A Market Overview

Highlighted Food and Beverage M&A Transactions1

Ingredion to Acquire PureCircle

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  • Ingredion to acquire a 75% stake in PureCircle for an undisclosed amount.
  • Based in Chicago, IL, PureCircle produces and distributes stevia sweeteners and flavors for the global food and beverage industry.
  • PureCircle brings Ingredion market-leading innovation and manufacturing expertise related to stevia. Sugar reduction is a core growth platform for Ingredion, and stevia is a core product for the sugar reduction portfolio.

Grecian Delight Foods Merged with Kronos Foods

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  • Grecian Delight has merged with Kronos Foods for an undisclosed amount. 
  • Based in Elk Grove Village, IL, Grecian Delight is a manufacturer and marketer of Mediterranean-inspired cuisines comprising gyros, specialty meats, pitas, and other products.
  • Based in Glendale Heights, IL, Kronos Foods is a manufacturer of Mediterranean-inspired proteins, bakery products, hummus, sauces, and dips. 
  • The merger will allow Grecian Delight and Kronos Foods to accelerate growth into global cuisine and protein-based foods. 

PepsiCo to Acquire Rockstar Energy Beverages

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  • PepsiCo to acquire Rockstar Energy Beverages for $3.9 billion.
  • Based in Las Vegas, NV, Rockstar produces energy drinks in over 30 flavors across the convenience and grocery channels.
  • The acquisition will enable PepsiCo to capitalize on rising demand in the functional beverage space and expand in the fast-growing energy category.

M&A Market Overview*

Food and Beverage M&A Trends1

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Latest Deals and Announced Private Equity Activity1

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* M&A transactions include European and cross-border deals since 2015.

Debt Market Overview

Food and Beverage Loan Activity6

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Recent Debt Offerings7

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M&A Overview*

Median LTM Trading Multiples & Quarterly Food & Beverage M&A1

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Recent Food and Beverage M&A1

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Food and Beverage Earnings Release Calendar

Earnings Release Calendar1

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Public Comparables1

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1. Capital IQ

2. Unweighted Average

3. US Census Bureau

4. U.S. Bureau of Labor Statistics

5. Thomson Financial

6. S&P

7. Reuters

 

The information and views contained in this report were prepared by Harris Williams LLC (“Harris Williams”). It is not a research report, as such term is defined by applicable law and regulations, and is provided for informational purposes only. It is not to be construed as an offer to buy or sell or a solicitation of an offer to buy or sell any securities or financial instruments or to participate in any particular trading strategy. The information contained herein is believed by Harris Williams to be reliable but Harris Williams makes no representation as to the accuracy or completeness of such information. Harris Williams and/or its affiliates may be market makers or specialists in, act as advisers or lenders to, have positions in and effect transactions in securities of companies mentioned herein and also may provide, may have provided, or may seek to provide investment banking services for those companies. In addition, Harris Williams and/or its affiliates or their respective officers, directors and employees may hold long or short positions in the securities, options thereon or other related financial products of companies discussed herein. Opinions, estimates and projections in this report constitute Harris Williams’ judgment and are subject to change without notice. The securities and financial instruments discussed in this report may not be suitable for all investors and investors must make their own investment decisions using their own independent advisors as they believe necessary and based upon their specific financial situations and investment objectives. Also, past performance is not necessarily indicative of future results. No part of this material may be copied or duplicated in any form or by any means, or redistributed, without Harris Williams’ prior written consent. 

Harris Williams LLC is a registered broker-dealer and member of FINRA and SIPC. Harris Williams & Co. Ltd is a private limited company incorporated under English law with its registered office at 8th Floor, 20 Farringdon Street, London EC4A 4AB, UK, registered with the Registrar of Companies for England and Wales (registration number 07078852). Harris Williams & Co. Ltd is authorized and regulated by the Financial Conduct Authority. Harris Williams & Co. Corporate Finance Advisors GmbH is registered in the commercial register of the local court of Frankfurt am Main, Germany, under HRB 107540. The registered address is Bockenheimer Landstrasse 33-35, 60325 Frankfurt am Main, Germany (email address: hwgermany@harriswilliams.com). Geschäftsführer/Directors: Jeffery H. Perkins, Paul Poggi. (VAT No. DE321666994). Harris Williams is a trade name under which Harris Williams LLC, Harris Williams & Co. Ltd and Harris Williams & Co. Corporate Finance Advisors GmbH conduct business.