What We’re Seeing

Market Update

The food & beverage M&A market remains active through August with several notable transactions. Tyson Foods agreed to acquire Keystone Foods, a distributor of chicken, beef, and fish products for $2.1 billion. United Natural Foods (UNFI) agreed to acquire food distributor and grocery retailer Supervalu for $2.9 billion. C.H. Guenther & Son acquired Cookietree Bakeries, a Utah-based manufacturer of branded and private-label food products for leading quick-service restaurants and retailers.

What We’ve Been Reading

Consumer Demand For Fresh Illuminates Growing Opportunity For Grocers

Fresh snacking has been the recent catalyst behind growth in grocery stores’ snacking categories. According to SPINS, the $40 billion dollar conventional snacking marketing declined 2 percent annually over the past three years, while the health-and-wellness snacking market grew 6 percent annually driven by an 8 percent growth in the fresh snacking market. Despite the rise in e-commerce, studies have proven consumers still shop brick-and-mortar for fresh products. With more consumers seeking fresh products, it is clear that shelf stable products will continue to yield space to fresh products in the perimeter of the store.

Access the full article here.

Plant-Based Product Sales Rise By An Incredible 20 Percent

According to Nielsen’s study, plant-based product sales grew by 20 percent in the 52 weeks ending June 16, 2018, reaching a total of $3.3 billion. Over the same period, total food sales grew just 2 percent, proving that plant-based products are no longer just a niche market. According to Jaime Athos, CEO of Tofurky, the continued growth in plant-based products is attributed to readily accessible information about the health, environmental, and moral downfalls of eating meat coupled with the existence of high-quality alternatives.

Access the full article here.

Will High Trucking Costs Eventually Run Over Food Companies' Ability To Grow?

According to The Wall Street Journal, a trucking shortage in the United States has caused freight prices to soar upwards of 20%. One of the primary drivers of rising freight prices is the continued growth in e-commerce grocery orders, which has shifted the entire industry by demanding that manufacturers get products to customers on short schedules and in the same condition as if everything was hand selected at the store. Many large manufacturers, including Tyson and Kellogg, said higher transportation costs weighed on earnings in the most recent quarter.

Access the full article here.

Vital Signs

screen_shot_2018-09-11_at_3.58.47_pm.png

screen_shot_2018-09-11_at_4.00.56_pm.png

Public Equity Market Overview

Key Trading Statistics4

screen_shot_2018-09-11_at_4.02.45_pm.png

Public Company Sector Performance (Median One Year Change In Stock Price)4

screen_shot_2018-09-11_at_4.03.39_pm.png

Recent Equity Offerings5

screen_shot_2018-09-11_at_4.04.21_pm.png

Food And Beverage Industry Stock Performance Index4

screen_shot_2018-09-11_at_4.05.04_pm.png

M&A Market Overview

Highlighted Food And Beverage M&A Transactions4

Tyson Foods To Acquire Keystone Foods

screen_shot_2018-09-11_at_4.06.32_pm.png

  • Tyson Foods has agreed to acquire Keystone Foods for $2.1bn.
  • Based in West Chester, PA, Keystone Foods processes and distributes chicken, beef, fish, and is a major supplier of chicken nuggets to McDonald’s Corporation.
  • The acquisition will strengthen Tyson Foods Inc's global presence and expand its food service capabilities.

 

C.H. Guenther & Son Acquires Cookietree Bakeries

screen_shot_2018-09-11_at_4.07.45_pm.png

  • C.H. Guenther & Son has acquired Cookietree Bakeries.
  • Based in Salt Lake City, UT, Cookietree Bakeries produces and supplies cookies and cookie dough primarily to the foodservice industry.
  • The transaction will strengthen CH Guenther & Son’s private-label capabilities.

 

United Natural Foods To Acquire SUPERVALU

screen_shot_2018-09-11_at_4.08.47_pm.png

  • United Natural Foods (UNFI) has agreed to acquire Supervalu for $2.9bn.
  • Based in Eden Prairie, MN, Supervalu distributes and sells food and nonfood items and operates retail grocery stores.
  • The acquisition will help UNFI reduce its dependence on Whole Foods, which accounts for about 1/3 of UNFI’s business.

 

Food And Beverage M&A Trends4

screen_shot_2018-09-11_at_4.09.50_pm.png

Latest Deals And Announced Private Equity Activity4

Last 10 Deals Announced

screen_shot_2018-09-11_at_4.11.18_pm.png

Private Equity Investments & Exits

screen_shot_2018-09-11_at_4.11.59_pm.png

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

Debt Market Overview

Food And Beverage Loan Activity6

screen_shot_2018-09-11_at_4.13.26_pm.png

Recent Debt Offerings7

screen_shot_2018-09-11_at_4.14.25_pm.png

M&A Overview*

Median LTM Trading Multiples & Quarterly Food & Beverage M&A4

screen_shot_2018-09-11_at_4.15.57_pm.png

Recent Food and Beverage M&A4

screen_shot_2018-09-11_at_4.16.40_pm.png

picture1_29.png

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

Food and Beverage Earnings Release Calendar

Earnings Release Calendar4

screen_shot_2018-09-11_at_4.18.55_pm.png

Public Comparables4

picture1_30.png

picture1_31.png

picture1_32.png

picture1_33.png

picture1_34.png

1. U.S. Bureau of Labor Statistics

2. Unweighted Average

3. US Census Bureau

4. Factset

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.

 

Investment banking services are provided by Harris Williams LLC, a registered broker-dealer and member of FINRA and SIPC, and Harris Williams & Co. Ltd, which is a private limited company incorporated under English law with its registered office at 5th Floor, 6 St. Andrew Street, London EC4A 3AE, 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 is a trade name under which Harris Williams LLC and Harris Williams & Co. Ltd conduct business.