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Diving brief:

• After a relatively quiet period of mergers and acquisitions in the food and beverage sector compared to previous years, activity appears to be gaining momentum due to changing consumer preferences, falling rates of interest and the efforts made by managers to rationalize their portfolios. according to CoBank.
• This year, there were on average fewer than 500 transactions per quarter, a drop of almost 40% compared to the period 2021 to 2023, the cooperative bank noted. But conditions that previously held back deal-making appear to be thawing, creating opportunities in a few areas.
• Executives told analysts they remained looking for companies to buy, but would most likely buy a smaller company if they made an acquisition. “It seems like our focus right now, and what we’re actually seeing in the market, is probably a greater availability of smaller assets that we could focus on that would enhance our growth,” Jeffrey Harmening, CEO of General Mills, told analysts in September.

Dive overview:

Billy Roberts, senior food and beverage analyst at CoBank and author of the report, said consumer interest in better-for-you snacks will likely increase merger and acquisition activity in this area. Plant-based meat alternatives are also ripe for consolidation as they contain several smaller brands, and the sector as a whole has seen slower growth of late.

Additionally, smaller companies could merge with each other to expand their business, or find themselves the target of a larger consumer goods company seeking a strategic deal.

Roberts added that manufacturers are increasingly aligning their SKUs around the 80/20 principle (80% of revenue tends to come from one-fifth of their brands) and dedicating their attention to that more profitable 20%. This has prompted some companies to streamline their portfolios by selling products or brands that do not fit this strategy or that add complexity to the supply chain.

“These acquisitions not only reduce some of the pressure on brands’ R&D departments to innovate, but these typically smaller deals are also more financially palatable,” Roberts wrote. “In fact, several recent acquisitions have been smaller. »

This year, larger deals have taken place or been announced.

General Mills announced plans to sell its North American yogurt business to French companies Lactalis and Sodiaal for $2.1 billion as the cereal giant moves away from dairy products. PepsiCo announced plans to buy Mexican-American food maker Siete Food for $1.2 billion. And the giant of candies and chewing gum Mars agreed to buy snack maker Kellanova for $35.9 billion, the largest food and beverage deal since Kraft Heinz’s $45 billion merger in 2015.

But much activity has been reduced. Campbell’s soup sold Pop Secret popcorn for an undisclosed amount, and Danone offers to buy kefir manufacturer Lifeway Foods for $283 million. Creator of Dippin’ Dots J&J Snack Foods acquired the Thinsters cookie brand from organic and natural product manufacturer Hain CelestialAnd Conagra Brands has purchased the maker of fatty smoked meat sticks.