Food & Beverage M&A
Food & Beverage Reports

Food & Beverage Report 1H 2022


After a slowdown at the start of the Covid-19 pandemic, Mergers and Acquisitions in the Food & Beverage Industry accelerated through 2021, spurred in part – like other industries – by the hint of looming a higher capital gains tax rate that never materialized, while buyers leveraged low interest rates and significant stores of dry powder. We are seeing 2022 shaping up to be an active period as well as private equity remains active and larger, industrial brands look for smaller players to fill out their lineup. There are some concerns about rising interest rates, but for those with money to spend, both in private and public spaces, the struggling stock market could make acquisitions an attractive place to park money.

Even in comparison to a robust 2021, dealmaking in the U.S. was up significantly in the 1Q22 as more realistic valuations are luring bigger players looking to add components and keep up with changing consumer tastes. We saw Mondelez – makers of Oreos and Ritz crackers – snap up Mexican bread maker Bimbo’s confectionary side for $1.3 billion and U.S. nutrition bar Clif Bar for $2.9 billion.

Those consumer tastes and trends include growing demand for better food solutions, not just healthier and organic products. Health is still a concern after two years of a virus being in the news every day. But the rush to plant-based meat alternatives may be cooling as consumers start to think about how processed those alternatives must be. Concerned about the estimated $2.6 trillion in wasted food annually around the world, consumers have us looking at new companies that are combating food waste. And as 1H22 closed, food inflation was running above 10% in the United States and 9% in Canada…

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Food & Beverage Report 2H 2021


Never satisfied with the status quo, the Food & Beverage industry continued to hunger for growth through 2021. Bigger producers have focused their efforts on expanding their exposure to high-growth emerging CPG brands through M&A.

Moving on from a challenging 2020, the year the COVID pandemic closed restaurants and saw consumers locking themselves at home, the sector began to show signs of life – and dare we say “growth” – in 2021. Growth in snack sales, boosted by the stay-at-home crowd, appears to be sustainable, and companies are investing in infrastructure to capitalize. Consumers flush with cash after a year avoiding bars and restaurants, are ready to spend again. And manufacturers, such as American Foods Group, announced renewed investments in production with the construction of a $450 million Missouri beef processing facility expected to create 1,300 jobs and a billion-dollar economic impact in the area.

Some of the largest players moved to shed portfolio components that showed signs of slowing while advancing in growth positions such as sports and energy beverages. We are also watching closely as big food protein processers invest in – or acquire – potential competitors in alternative sectors, such as cell-manufactured or plant-based competitors as a hedge…

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Food & Beverage Report 1H 2021


If we are what we eat, surveys show most people want to be healthy. So healthy eating is becoming a regular drumbeat across the Food & Beverage industry. Stuck at home in 2020 – with many restaurants closed, home cooking replacing on-the-go dining, and the kids eating out of the fridge instead of at the school cafeteria – consumers turned an eye to just what’s in that snack or meal. As we move out of the pandemic, those new habits – and preferences – may be here to stay. A 2021 U.S. survey found 73% of Americans say they are confident they can identify healthy foods – 67% of them say they understand the labeling information – and nearly 60% say healthy ingredients are a driver when making a purchase. More than 70% say they are avoiding sugars, although it’s worth nothing taste remains king. Healthy food still needs to taste good.

It will be interesting to see how the consumer packaged goods industry reacts to these consumer shifts and better consumer education. We’re watching some in CPG that have already reacted and adapted. Companies that focus on sugar reduction technologies – and avoiding the aftertaste some sugar alternatives encounter – are worth watching. Recently, Israel’s Better Juice built a test plant and landed $8 million in funding. The company incorporates a technology that converts fructose, glucose and sucrose into dietary fibers and non-digestible molecules. The company reports the process helps reduce up to 80% of all sugar. The product is aimed at orange juice producers. It’s not just start-ups chasing a good-tasting sugar substitute, industry giants Nestlé and Ocean Spray are in the game as well…

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Food & Beverage Report 2H 2020


Even as some business sectors suffered, and continue to suffer, during the global COVID-19 pandemic, the food & beverage Consumer Packaged Goods (CPG) sector enjoyed tremendous growth, in part as a direct result of the pandemic.

Around the world, consumers were banished from their offices and sent to work from home. As Zoom online calls replaced in-person meetings, traditional lunches out or stops on the way home were replaced by home cooking. In the U.S., restaurant sales fell $240 billion off industry expectations for the year. But people still have to eat – in March, grocery food sales were up 30% for the month, compared to prior year sales. After a frantic “stocking up” phase, food CPG growth remained up 12% through November. For the first time in years, Canadian and U.S. consumers began spending more money in the supermarket than on restaurants and take out.

We saw more than an across the board increase in demand for CPG foods. There was nuance in the demand. With healthcare in the news daily, warnings about precautions, and the ubiquitous face mask, it was only natural consumers became more health-conscious and more concerned about the food they consume. And while the kids might eat spaghetti for a few meals, that gets old. Families began exploring new foods, new spices, and new things to enjoy together. Cookbook sales in the U.S. were up 15% through September…

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The global pandemic has had a dramatic impact on the entire Food & Beverage Industry, driven largely by major changes in consumer behavior.  With lockdowns and stay-at-home orders, the entire foodservice sector was decimated, while there was a corresponding surge in spending at the grocery store.  According to Mintel, increased sales were reported across all departments, with the frozen aisle and shelf-stable categories seeing the largest increases during the late winter/early spring.  Fresh produce also saw strong sales since the onset of the pandemic, according to The Packer, and online grocery sales have been breaking new records, according to Digital Commerce 360.

We tracked 99 M&A transactions in the Food & Beverage Industry during the first half of 2020, with a median deal multiple of 9.1x EBITDA and 0.6x revenue. The most active segment was Alcoholic Beverages with 26 transactions.  CPG Foods and Non-Alcoholic Beverages were also active segments and had 17 transactions each.

Publicly traded EBITDA multiples were an average of 16.9x TTM EBITDA for the Food & Beverage Industry segments we track, down from 18.2x TTM EBITDA from the first half of 2019.


One of the many Food & Beverage trends impacted by the pandemic has been an increased and accelerated interest by consumers in healthy foods and beverages to boost immunity.  Google search terms such as “immunity-boosting foods” and “high Vitamin C foods” saw as much as a 300% spike in frequency during March; particularly in places such as New Jersey, New York and California where the virus outbreak was trending upward at the time…

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We tracked 147 M&A transactions in the Food & Beverage Industry during the second half of 2019, with a median deal multiple of 8.5x EBITDA and 1.3x revenue. The most active segment was CPG Foods with 31 transactions. Restaurants and Alcoholic Beverages were also active segments and had 29 transactions each.

Publicly traded EBITDA multiples were an average of 21.1x TTM EBITDA for the Food & Beverage Industry segments we track, up from 18.2x TTM EBITDA from the first half of 2019.


A recent research survey conducted by the Agri-Food Analytics Labs, at Dalhousie University in Nova Scotia, Canada, found that Canadians are highly concerned about food waste, driven partially by rising food costs. Approximately 53% of survey participants said they plan to take steps to reduce food waste in their home in 2020. Many also plan to eat out less often, look for discounts at retailers and plan to buy in bulk to save on food-related expenditures.

Awareness of in-home food waste has been rising and a recent study by Ohio State indicated that the top drivers of food waste in the home are concerns about food safety, odor, appearance and dates on the label.

“No one knows what ‘use by’ and ‘best by’ labels mean and people think they are a safety indicator when they are generally a quality indicator,” said the study’s author, Brian Roe. The study found that Americans consume only about 40-50% of the fruits, vegetables, dairy and meat they purchase.

Currently, product date labeling is required only for infant formula at a federal level, however there are new labeling rules being proposed to help reduce consumer confusion over “use by” (safety) and “best if used by” (quality) guidelines.

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Food & Beverage Report - 1H 2019


We tracked 190 M&A transactions in the Food & Beverage Industry during the first half of 2019, with a median deal multiple of 10.6x EBITDA and 1.4x revenue. Restaurants was the most active segment with 45 transactions. CPG Foods, Alcoholic Beverages and Proteins were also active segments and had between 29 and 31 transactions each.

Publicly traded EBITDA multiples were an average of 18.2x TTM EBITDA for the Food & Beverage Industry segments we track, up from 13.7x TTM EBITDA at the end of 2018.


Meat Alternatives

According to UBS, the plant-based meat alternatives market is poised to grow from $4.5 billion in 2018 to $85 billion by 2030; a growth rate of over 25% per year, which goes well beyond any anticipated growth trends in veganism or vegetarianism. Animal protein companies such as Tyson and Maple Leaf Foods are taking notice and investing in the plant-based meat alternative trend as well.

However, if you look at the ingredient list on a Beyond Meat or Impossible Burger label, you will notice a long list of ingredients; many of which are highly processed. Certainly, consumption trends are based on the perception that a “plant-based” burger is healthier than an “animal-based” burger, however there is very little evidence that this perception is true. Undoubtedly, high levels of regular red meat consumption are negatively associated with an increased risk of heart disease and other health issues, but on a burger to burger comparison, they have a similar nutritional profile (similar calories but plant-based have slightly less saturated fat and higher sodium). Meanwhile, consumers are gravitating towards foods with simple, easy-to-pronounce food ingredients that are minimally processed. It will be interesting to see how the typical health-conscious, “better-for-you” consumer reacts to this dichotomy.

CBD Consumables

CBD-infused or cannabidiol-infused food and beverages are receiving a lot of attention in both Canada and the U.S., since cannabis consumption was legalized across Canada last year, and since the USDA outlined hemp production regulations in the 2018 Farm Bill (hemp can be produced, and the oil processed for its low THC/high CBD content). Not to be confused with cannabis-infused edibles that incite a psychoactive effect associated with its THC content, CBD-infused food and beverages are being marketed for their functional properties. According to the Harvard Medical School, CBD has been proven to be effective for the treatment of some forms of epilepsy. Additionally, there is growing evidence it can be effective in reducing insomnia, addressing anxiety and pain relief…

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Food & Beverage Report - Q4 2018


We tracked 98 M&A transactions in the Food & Beverage industry during the fourth quarter of 2018, with a median deal multiple of 9.7x EBITDA and 1.1x revenue. Restaurants and CPG Foods were the most active segments, with 23 and 22 transactions, respectively.

Publicly traded EBITDA multiples over the last twelve months remained quite high at 13.7x TTM EBITDA for most of the Food & Beverage industry segments we track.


While many industries rely heavily on the use of plastics, the Food & Beverage industry is particularly reliant on plastic packaging to ensure food is safe, fresh and convenient for consumers.

According to the UN, the world produces approximately 400 million metric tons of plastic per year, with only 9% of it being recycled. Beginning in January of 2018, China banned the import of plastic waste from other countries, forcing many western governments, for whom it is cheaper to export the plastic overseas than it is to sort and recycle it at home, to rethink their plastic recycling programs. Furthermore, many containers composed of complex mixed plastics are difficult or impossible to recycle economically. Recent media reports about large ocean patches of floating plastic, such as the “Great Pacific Garbage Patch” (a 1.6 million square kilometer zone in the middle of the Pacific Ocean that is twice the size of Texas), have further garnered consumers’ attention on ways to make food and beverage packaging more sustainable.

This increased focus on making food and beverage packaging more sustainable presents a host of challenges.  Companies that can successfully innovate by making their product packaging “greener” have the opportunity to become champions of innovation in the marketplace. By offering packaging materials that are reusable, recyclable, compostable and/or biodegradable, while maintaining consumer convenience, innovative companies stand to gain dominance in the marketplace, as long as those innovations are cost effective.

The big food companies are taking notice and in recent years, many have made announcements of lofty goals that will be challenging to achieve.  McDonald’s has committed to using 100% renewable (eg: biomass), recycled or certified (eg: from sustainable forest initiatives) guest packaging by 2025, as well as 100% recycling in their restaurants.  Companies such as Sustana are leading the way in sustainable packaging solutions, with products like EnviroLifeTM, the only recycled fiber that is FDA-compliant for direct food contact.  Additionally, the USDA is supporting the cause by developing a biodegradable packaging film made from the milk protein casein.  Many in the beverage sector are moving away from plastic bottles to cartons or other aseptic packaging, in order to reduce their…

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Food & Beverage Report - Q3 2018


We tracked 116 M&A transactions in the Food and Beverage industry during the third quarter of 2018, with a median deal multiple of 16.0x EBITDA and 1.3x revenue, among transactions with reported values. Restaurants and CPG Foods were the most active segments, with 34 and 32 transactions, respectively.

Publicly traded EBITDA multiples over the last twelve months remained quite high, at 13.9x TTM EBITDA for most of the Food and Beverage industry segments we track.


The GMO labeling laws are changing in the U.S. While the details and nuances are beyond the scope of this report, the impact the changes may have on the industry and the M&A market are important and warrant a close watch by industry participants. A recent study showed that seven out of 10 consumers have little idea of what GMO actually is. Voluntary labeling initiatives, such as Non-GMO Project’s certification program have added to consumer confusion, by labeling products as Non-GMO, even when there is no GMO equivalent of the product.

Recently, companies like Nestle and Chipotle are facing class action lawsuits for claiming their products are non-GMO when the products contain dairy and/or meat that was raised on feed that may have contained GMO ingredients. This creates further confusion in the marketplace, when consumer expectations of labeling now include the production process rather than the product itself. Hopefully, the new labeling requirements will limit the amount of misleading claims allowed, be based on sound science, provide clear choices for consumers and reduce confusion.

Implementation of the new rules surrounding the Food Safety Modernization Act (FSMA) in the U.S. and the Safe Food for Canadians Act (SFCA) in Canada are challenging many in the industry. In the U.S., FSMA audits are testing the requirement that line workers understand “why” they are doing certain things, which requires a deeper level of training. Many firms also report challenges in the Foreign Supplier Verification Program (FSVP) and in documenting compliance throughout the supply chain. A recent survey conducted by Food Safety Magazine indicated that only 70% of firms in the U.S. and Canada (those shipping into the U.S.) feel they are in full compliance with FSMA, while 27% indicate they are “working on it.”

With food safety recalls constantly in the news and consumers’ growing awareness of the impact of their eating habits on their health, companies’ food safety regulatory compliance and track records will continue to impact M&A activity and deal valuations. In the spirit of cooperation, the Canadian and U.S. governments have a food safety regulatory “systems recognition arrangement” similar to their respective recognition of each other’s rules around organic labeling…

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Food & Beverage Report - Q2 2018



We tracked 88 M&A transactions in the Food and Beverage industry during the second quarter of 2018, with a median deal multiple of 12.30x EBITDA and 1.74x revenue, among transactions with reported values. Restaurants and Alcoholic Beverages were the most active segments, with 20 and 14 reported transactions, respectively.

Publicly traded Enterprise Value/EBITDA multiples for the last twelve months remained quite high for most Food and Beverage segments we track, ranging from a low of 9.7x LTM EBITDA for Fine Dining to a high of 43.9x LTM EBITDA for Digitally Native, a multiple that is likely so high due to the weight many investors place on growth over profitability.


CPG food companies face a daunting and never-ending challenge of increasing, or at least maintaining, the consumption of their products while tightly managing their costs to produce, market and distribute them. With the consumer looking for healthier choices that are cost-competitive, food processors need to pay close attention to their ingredient choices. Fortifying food products with natural, functional ingredients to legitimately improve nutritional and health benefits is a key strategy being employed by many of the major CPG food companies. For example, consumers can now buy cookies or pasta that contain one or more “servings” of fruits or vegetables.

Sales of new naturally fortified products can potentially command a premium, or, at the very least, provide an edge in a highly competitive market. Many CPG companies are adding consumer choices by broadening product lines with “premium” brands that offer and support nutritional or health claims.

According to Market Research Future, the food fortification ingredient market is expected to grow at a 4.5% CAGR through to 2022, driven by an expected continued increase in fortified food product launches by major food companies.

While the major ingredient companies such as Ingredion, DSM, Cargill and ADM offer a host of solutions, many smaller players are emerging as the market demand increases and the science behind the potential health benefits evolves.

With the aim of keeping their functional ingredients competitively priced, many companies are using new technology to manufacture their ingredients using by-products and food waste. RISE Products uses spent brewer’s grain to make its high-protein, high-fibre, low-carb flour. Renewal Mill uses grape/olive pomace, okara (soymilk by-product), etc. to formulate its ingredients. Nutrifusion uses its patent-pending processing technology to make its blends of fruit and vegetable powders that retain the bio-activity of its phytochemicals…

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Food & Beverage Report - Q1 2018



Publicly traded EBITDA multiples over the last twelve months remained quite high for most of the Food and Beverage industry categories we track, led by the Digitally Native segment (companies like Grub Hub, Just Eat, etc.).

We tracked 73 M&A transactions in the Food and Beverage industry during the first quarter of 2018, with a median deal multiple of 5.9x EBITDA and 0.7x revenue, among transactions with reported values. Restaurants and CPG Foods were the most active segments, with 15 transactions each.


The non-alcoholic beverage market continues to evolve rapidly as consumers across the U.S. and Canada increasingly choose healthy, natural and/or functional beverages, with unique flavours and innovative packaging, over carbonated soft drinks and other traditional beverages. While most major brands have their own lines of healthy alternatives, newer emerging brands are gaining momentum through innovative marketing and promotion tailored to health-conscious consumers who are willing to pay premium prices. Some of the most successful brands seem to have effectively integrated their online marketing strategies with their retail and food service channel promotion strategies. By connecting directly with their consumers and brand ambassadors on social media platforms, brand attributes such as nutrient content, processing/production methods or health claims can be more effectively marketed. This is leading to pantry loading through online sales by loyal customers that have incorporated their favourite healthy beverage into their daily lifestyle.

Another trend we are watching closely is the growing popularity of consumers adding more plant-based, whole foods into everyday diets. The plant-based protein sub-category global market is expected to reach $5 billion by as early as 2020 (Markets and Markets), may grow to $16 Billion by 2025 (Persistence Market Research) and could represent approximately one third of the total global food protein market by 2054 (Lux Research). This has led companies like Maple Leaf Foods, Tyson, Cargill and Perdue to make acquisitions both in operating companies to round off their core meat protein businesses and brands, as well as technology and venture capital investments in promising new start-ups…

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Q4 2017 Food & Beverage Report



The Food & Beverage industry continues to rapidly adapt to ever-changing consumer expectations and demands. Industry participants need clear strategies that lower COGS and operating expenses for center-of-the-aisle products, while simultaneously looking for ways to grow market share and capture positions in growing categories. Consumers’ growing appetite for foods and beverages perceived as “better for you,” such as clean-label, local, plant-based, organic, whole and natural, are well entrenched, yet the large, diversified, packaged food & beverage companies have lagged the smaller, nimble food companies in capturing this market.

This has created an interesting and highly active M&A market over the last few years, as industry participants jockey for positions and market share. The end result has been high and rising valuations, driven by the low cost of debt financing and the strong corporate balance sheets of the majors as they chase fewer quality deals. We believe that demand for middle and lower-middle market food & beverage companies that are “on-trend” and have an established track record in either retail or food service markets has never been stronger.

We tracked 93 transactions in the Food & Beverage industry during the fourth quarter of 2017, with a median multiple of 12.3x EBITDA (average 10.2x) and 1.4x revenue (average 2.0x). CPG Foods was the most active segment, followed by Restaurants and Alcoholic Beverages.

Trends to Watch

For food & beverage companies locked into the production of staple products, cutting operating costs is an ongoing initiative. One of the more interesting technologies that we believe may hold great promise to reduce operating costs is the blockchain. While normally considered the underlying technology for cryptocurrencies, such as bitcoin, this technology has the potential to significantly lower costs throughout the food & beverage supply chain, as well as drive many consumer benefits such as food safety and traceability. Recently, IBM announced that it had formed a consortium of major retailers, including Walmart and Costco, to pilot blockchain technologies to improve food transparency, traceability and improve proficiency of food recalls, should they be required.

Several start-ups, such as Provenance and are also focused on applying blockchain solutions to the food & beverage supply chain. Through the use of sensors and automation, theses companies expect to make major advancements in lowering the cost of recalls by allowing companies to react faster, and to operate much more precisely. expects to lower the costs of food waste in the produce segment by reducing handling bottlenecks currently affecting freshness. There are also significant opportunities through the use of “smart contracts” to lower the costs of doing business by freeing up working capital throughout the supply chain…

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Food & Beverage Report - Q3 2017


If you read this report often, we are quite sure that you have become accustomed to the narrative that seems to repeat itself in this industry: the ground beneath our feet is shifting. In recent years, the primary driver has been the growth of consumer ideologies that go beyond the sensory experiences that products provide. This has led to massive shifts in market share away from large, established brands to new innovators.

We believe that this will continue to fuel incremental change in every category, as well as affect the M&A and capital formation landscape. That said, the latest transformational development in the space was the Amazon/Whole Foods deal. However, we do not believe this development to be the underlying fuel, much in the same way that natural/organic is actually fueled by the aforementioned consumer underpinnings.

Alas, Amazon is going to do what Amazon does: utilize scale and technology to get product into people’s hands; it is going to compete through democratization. We believe this is an existential threat to all brands in all categories, especially if there is no intrinsic technology or barrier to competition. Nonetheless, there will always be consumers who pay premiums to remain loyal to brands they trust. Truly at risk is the market share that large brands have held onto that has not shifted to the new guard of natural/organic/premium (“NOP”). In our opinion, the consumers who pay premiums are already leaving the stalwarts because of quality. If NOP is presented as a cheap, competitive option, commodity-driven consumers will choose the higher quality product, all other things equal. And in Amazon’s case, making NOP cheaper is “all other things equal.”

Our thinking is this: Amazon is here. Trader Joes is here. Lidl and Aldi are coming. Kroger, Albertsons, and others can and will compete with powerful private label lines. Innovation will still be king, and it’s therefore a question of how defensible one’s innovation is. This is the primary factor that will drive M&A in this industry in the next 10 years…

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Q2 2017 Food & Beverage Report


Did you hear that some ecommerce site bought a natural foods chain? If you have, then you know that people far more intelligent than us have already written about it. If not, welcome back from whatever tropical island you were stranded on – we hope you had sunscreen.

Our view on the Whole Foods (“WFM”) deal is that it is awesome and important, but it is really an outcome of the true independent variable here: the modernization of supply chain in food & beverage. This concept is comprised of two things: (1) packaged food is moving online and (2) the center of the store is shrinking.


Last year’s FMI/Nielsen collaboration suggested that by 2025, 20% of grocery commerce will happen online in the U.S., representing $100B in annual consumer sales. Put another way, the equivalent of 3,900 grocery stores will be moving online. Interestingly, 26% of online food sales already happen through Amazon (“AMZN”). Now with over 400 local nodes of distribution, AMZN has everything it needs to run with this. It’s not exactly prophetic to say that AMZN can take over an online category; just take a look at what it did to batteries. If AMZN is taking 80% to 94% online market share in various categories6, is it too much to assume that it can eventually get to 50-55% in online food sales, especially with WFM’s infrastructure? To give a sense for how big this can be, we did some simple napkin math to illustrate AMZN’s opportunity…

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Q1 2017 Food & Beverage Report


In last quarter’s issue, we discussed the macroeconomic and regulatory trends that we expect to affect the industry in 2017. We also promised to share our view on micro trends, defined as (1) consumer ideologies, (2) retail trends, (3) the consumer palate and (4) innovation. To put this more succinctly, the investors and strategic buyers that we spend a lot of time speaking to have helped us shape a core thesis for 2017.


Cost and convenience, according to 77% of U.S consumers, are the main purchase drivers, above all others. While we believe cost is important, anecdotal secular trends clearly point to cost being a threshold, and convenience being the consumer need story. At the core of consumer convenience are digitally native brands that bring shopping experiences and products directly to consumers through the internet.

In January of 2013, monthly visits to digitally native brand sites (i.e., Birchbox, Dollar Shave Club, Blue Apron, Graze, etc.) in the U.S. totaled 720,000. In January of 2016, monthly visits reached 21.4 million. Additionally, Techonomic, a Chicago-based market research firm, estimates that direct-to-door meal kit market revenue will increase 10x, from $1 billion in 2015 to $10 billion in 2020.

We don’t mean to overstate the importance of digitally native vertical brands, but there are a lot of them, and they are as pervasive across both fast-moving and durable consumer goods as technological advances in logistics will allow…

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Q4 2016 Food & Beverage Report

2016 is behind us. Some are glad to be rid of a year riddled with political uncertainty and celebrity deaths. SDR is just excited to talk about things to come in 2017. We’ve identified six areas of focus for the year:

  • Macro Trends: Economic and Regulatory
  • Micro Trends: Consumer Ideologies, Retail Trends, the Consumer Palate and Innovation

It would be nice if we could arrange those six items into an acronym, (CIRCER? ERCIRC?), but that is why McKinsey wouldn’t hire us out of business school. That said, we will share below our thoughts on Macro Trends and what to expect in 2017. We will discuss our views on Micro Trends in subsequent issues, but if you want to discuss now, please feel free to ask. We are always happy to flaunt our nerdiness.


Employment & Wages

The charts to the right tell us that based on three key factors (employment, hours worked and hourly earnings), Americans are making more money than ever before.

When people make more money, presumably they have more disposable income to buy food, and they can invest a little in pricier items that help contribute to good health (like plant-based dairy replacements) or their enjoyment (like craft sodas or cold brew coffee).

Political Uncertainty

While it’s difficult to say with conviction that the American consumer has been negatively affected by political uncertainty (food and beverage, grocery and beer and wine and spirits sales all increased healthily in 2016), there are some things to track under the new administration. The new President alluded to infrastructure spend and tax cuts that, theoretically, could create more disposable income for consumers.

President Trump also made allusions to trade restrictions, healthcare reform and housing. These issues all are too early stage for us to opine as to their potential net effect on consumer spending, but they are worth tracking…

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Food and Beverage M&A Report - Q3 2016

We believe nearly every category within food and beverage is experiencing a market share overhaul like nothing we have seen before. The consumer palate has become very dynamic as millennial consumers have matured into a large piece of the economy and the purchasing power of Hispanics has tripled over the past 15 years. The new consumer is asking for more transparent, healthy, authentic and natural foods that also provide an experience (bold flavors, ethnic concepts, etc.). Thus, a new customer base has been established, making large returns possible for companies with the ability to provide innovative products.

In Q3 2016, product innovation was rewarded in several categories, and here are some headlines:

Sauces and Seasonings
Products that provide a healthy way for consumers to add bold flavors to meals were attractive M&A candidates in Q3. ConAgra’s acquisition of Frontera and Red Fork, respectively, represented the addition of ethnic flavors, sauces and salsas to ConAgra’s consumer portfolio. B&G Foods also acquired the spices business of ACH Foods.

Grains and Baked Goods
While consumers increasingly prefer healthy products, they still want to indulge sensibly. Products that allow consumers to enjoy their favorite meals or snacks without consuming unwanted ingredients also were attractive M&A candidates. ADM acquired Caterina Foods, a leading producer of gluten-free and high-protein pastas and grains. ADM also acquired Soozie’s Doozie’s, an all-natural maker of non-GMO cookie mixes.

The consumer’s delight in innovation has been rewarded many times over in the coffee category, and the latest is Silicon Valley-based Philz Coffee. The company hopes to accelerate its growth plans by taking pour-over coffee mainstream. Philz received a $45-million growth investment from TPG in October to expand geographically.

Looking Ahead
The market continues to remain active, and strategic buyers that once sought stable, cash-flow generating companies with $100 million of revenue now are targeting much smaller companies. Many have taken the approach of forming investment vehicles so that they can place bets on multiple small brands as opposed to one large brand. This has caused private equity some difficulty in branded CPG food.

We expect private equity to continue to invest in the sector, but perhaps in more mature, consolidated segments where they are less likely to be outbid by strategic buyers. Private label foods, however, has held its market share across all categories for several years, and Treehouse Foods remains one of the only strategic players in private label. We expect private equity activity to increase steadily in this area in coming years.

FoodBytes Boulder
We attended FoodBytes Boulder, hosted by Rabobank, in October and were impressed by the emerging food technologies and brands. Several key themes stuck out, but among the most important was food waste. The beauty of many of the companies, like Mad Agriculture (, who is cultivating animal feed on composted food waste, or Regrained (, who uses beer grain waste from the brewing process for baked goods, is that these startups are not only finding ways to recycle waste, but they have identified low cost agricultural or food processing inputs that could change the game in fighting food supply issues.

Other interesting companies, like The Honest Stand ( have found incredibly innovative ways to give people with dietary restrictions access to their favorite foods. This is no new concept, but we at SDR have tasted a lot of plant-based dairy substitutes, and this was among our favorites…

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Q2 2016 Food & Beverage M&A Report

In 1957, applied mathematician and UCLA marketing professor Igor Ansoff introduced a concept called the Ansoff Matrix. The Ansoff Matrix was designed to visualize the strategy in which companies formulate products to enter markets. The purpose of the matrix was to give management teams the ability to think strategically about the potential risks and returns on various growth strategies.

The characteristics of each quality are explained below:

  • Market Penetration Quadrant: Least risky because product and market fit already have been proven/established. Least return because the lack of risk creates a low barrier to entry, meaning lots of competition. Usually a commodity/price-driven market where players who compete on price and capitalization win.
  • Market Development and Product Development Quadrants: Incrementally more risk and return because either the product or the channel has been proven, but not both. Incrementally more return because something special or innovative must be done to create a new product or enter a new market.
  • The Diversification Quadrant: Riskiest because the company is not just trying to acquire market share, but it’s also trying to create a new market altogether. There is no proof that existing channels for the product even exist.

Over the past five years, we have observed rapid venture capital investment and M&A activity in the diversification and product development quadrants, where innovation is derived from the conscious consumer demand for healthier, more functional, simpler, and allergen-free ingredients. These innovations started in many cases 25 years ago, but the rate at which consumer demand has accelerated toward these product features has rapidly outpaced the innovation cycles at large for food & beverage companies. This has created fertile ground for M&A activity…

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Industry Overview

Food & Beverage Segments vs. S&P 500 - Q1 2016

The emergence of the millennial generation as a consumer base continues to shape channels in the Food & Beverage Industry. Food & Beverage has lagged behind durable goods such as electronics and appliances as consumers shift to online shopping, but the landscape is changing. Large Food & Beverage players have already invested, or plan to invest heavily, in e-commerce platforms to prepare for increased consumer demand. Food & Beverage only makes up approximately $8B of the $347B total annual e-spend. Globally, Food & Beverage is expected to reach 10% of online shopping by 2020. South Korea currently is leading the industry, with approximately 80% of shoppers buying groceries online. According to BI Intelligence, several factors will contribute to the success of online grocery shopping including: freshness, convenience, product selection, subscription-based prepared meals that are differentiated from traditional supermarket shopping, as well as increased consumer adoption of same-day delivery offerings through services like AmazonFresh.

Jeffries predicts that by 2020 small brands, which were at $60B in value in 2008, or 33% of the segment, will grow to $95B, or half of the segment. Through e-commerce, many of these smaller brands will be able to connect directly with their customers through social media and online ordering platforms, reducing pressure to find shelf space through traditional channels. As consumers continue to shift toward e-commerce, smaller brands should not feel the same pressure to form partnerships with large distributors to expand their distribution footprint and will be able to distribute their products directly to their customers through third-party logistics providers.

Large brands also continue to invest in e-commerce. Pepsi recently hired Gibu Thomas as General Manager of E-commerce to make sure that the company is well-positioned to preemptively address global online shopping trends. PepsiCo CEO Indra Nooyi stated at the company’s 2015 annual shareholder meeting that “e-commerce is shaping up to be the next great revolution in the food and beverage industry.” Pepsi has used Amazon as a test lab for new products before conducting a wider expansion, including its stevia-sweetened Pepsi True. Mondelez announced that e-commerce would factor into its growth strategy with a goal of $1B in direct e-commerce sales by 2020. It launched Oreo Colorfilled over the 2015 holiday season, where Oreos in personalized packaging were sold direct-to-consumer for the first time ever.

Food & Beverage M&A activity has remained strong with 194 transactions so far in 2016. Strategic and financial buyers are focused on the agility, reactivity and innovation that small companies possess. With faster innovation cycles and initiatives that match consumers’ needs, small companies are great ways for large strategic firms to acquire talent and on-trend products without long the R&D cycles traditionally needed to innovate new products.

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