What We’re Seeing
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
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.
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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.
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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.
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.
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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.
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Restaurant and Grocery Store Sales Indices4
Consumer Food Price Index Inflation2
Key Trading Statistics1
Public Equity Market Overview
Public Company Sector Performance (Median One Year Change in Stock Price)1
Recent Equity Offerings5
Food and Beverage Industry Stock Performance Index4
M&A Market Overview
Highlighted Food and Beverage M&A Transactions1
Ingredion to Acquire PureCircle
- 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
- 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
- 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
Latest Deals and Announced Private Equity Activity1
* M&A transactions include European and cross-border deals since 2015.
Median LTM Trading Multiples & Quarterly Food & Beverage M&A1
Recent Food and Beverage M&A1
1. Capital IQ
2. Unweighted Average
3. US Census Bureau
4. U.S. Bureau of Labor Statistics
5. Thomson Financial
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