Food and beverage M&A dips in Q2, study finds

Dive Brief:

• M&A activity in the food and beverage sector during the second quarter fell, with 84 deals announced compared to 99 during the same time period a year ago, according to a report by Kroll, a provider of research and data. However, it was the eighth consecutive quarter with more than 80 deals in the North American food and beverage space.
• Kroll said the year-over-year drop was due largely to interest rate hikes, continuing global tensions, record-level inflation rates and supply chain constraints. 
• After several years of mega-deals, the food and beverage industry has largely focused on smaller, bolt-on acquisitions to provide CPGs quick access to a fast-growing space or to bulk up their existing presence in a category.

Dive Insight:

Despite the turmoil in the broader global economy, M&A has not come to a halt even if the pace has slowed down from 2021.

Among the higher-profile deals in the last few months, Mondelēz International purchased Clif Bar & Company for $2.9 billion with the potential for additional payments to expand its snack bar business, and Dippin’ Dots agreed to be acquired by Icee owner J&J Snack Foods for $222 million.

M&A activity has been especially robust in alcohol and nonalcohol. Kroll said during the trailing 12 months ending June 30, alcohol was responsible for 20% of deals while nonalcoholic was at 10%. Ingredients came in at 10% of deals, followed by general (10%), protein producers (9%) and better-for-you (8%). 

Alcohol has been a hotbed of activity as companies expand their presence into categories like ready-to-drink cocktails. During the second quarter, Constellation Brands bought the remaining stake in Austin Cocktails it didn’t already own, while Monster Beverage acquired Canarchy Craft Brewery Collective, a craft beer and hard seltzer company, that provided it with a “springboard” to enter the alcoholic beverage space.

Kroll noted that even with ongoing economic challenges and a potential recession, companies have positioned their businesses to make a deal.

“Due to the excess dry powder and copious amounts of capital in private equity markets and large corporations, we believe the food and beverage industry will remain an attractive and intrinsically defensive sector for investments and will continue to perform well in 2022,” the report found.

Rob Vitale, CEO of Post Holdings, has said the company behind brands such as Pebbles cereal and Bob Evans frozen sides plans to “aggressively pursue M&A.”

“We expect the volatile markets to lead to some larger opportunities,” the executive told analysts earlier this month. “We will remain disciplined on price regardless of market dynamics.”

Executives from dairy and plant giant Danone and Sovos Brands, the owner of Noosa yogurt and Rao’s sauces, told Food Dive recently that while they remain on the lookout for a timely acquisition, they have spent the last few months focused on navigating their businesses through the current economic environment.

“We always have our eye out,” Sovos CEO Todd Lachman said. “We’re not in a position where we have to suddenly do an acquisition to create some fog in our results.”