Exit and Growth Strategies for Middle Market Businesses

Food and Beverage M&A News

By Terry Fick | Aug 20, 2015

Beverage CansAs the global trend toward healthier foods continues, a key driver for M&A activity are targets in the organic, gluten-free, natural food and beverage segments. Larger established brands are counting on M&A as means to grow in the newer healthier environment. An example is Hormel Foods’ recent acquisition of Applegate Farms and its Applegate brand for $775 million. Applegate is a leading brand in the natural and organic value-added prepared meats category.

The trend towards healthier foods is also impact the value of established “junk food” brands. Diversified food companies in the US are shedding manufacturing operations amid weak demand for cookies and snacks. Post Holdings announced plans in March 2015 to close its PowerBar manufacturing facility in Boise, Idaho and shift production of the products to a third-party provider. Post’s decision reflects the difficult environment in the food and beverage industry, which has struggled as consumers’ tastes have shifted to healthy, fresh food, according to The Wall Street Journal. Post’s announcement comes a month after General Mills announced it will close a Pillsbury refrigerated baked goods plant in New Albany, Indiana, and little more than a year after Kellogg decided to shutter a cookie plant in Charlotte, North Carolina.

  • US nondurable goods manufacturers’ shipments of food products, an indicator of demand for food manufacturing, fell 0.8 percent year-to-date in May 2015 compared to the same period in 2014.
  • US retail sales for food and beverage stores, a potential measure of food demand, increased 3.2 percent in the first six months of 2015 compared to the same period in 2014.
  • According to data from the Interindustry Economic Research Fund, Inc. (IERF), revenue for US food manufacturers is forecast to grow at an annual compounded rate of 4 percent between 2015 and 2019.

Posted by Terry Fick.

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