In a corporate finance career for more years than I care to remember I have been involved in excess of 30 merger, acquisition and disposal transactions within the food and beverage manufacturing sector. These transactions have been in both the UK and Continental Europe. I have advised a range of companies including United Biscuits, RHM (now a part of Premier Foods) and Greencore, as well as a whole host of privately owned companies. Working with a such a galaxy of companies across a great many food categories I have developed an expertise based on a deep understanding of what drives this industry as a whole and its various categories in particular, and I continue to specialise in this sector.
If today you took a snapshot of the issues facing the industry you would see the forthcoming consolidation of Sainsbury’s and Asda, the impact of the increasing market penetration of Aldi and Lidl, the increasing pushback from consumers on the subject of excessive plastic packaging, industry’s response to consumer issues such as an increasingly obese population and consumer confidence in the source of produce. You would also observe changing shopping patterns which are leading to the accelerated decline of supermarkets in favour of local outlets. You could be mistaken for believing that the industry is going through an unprecedented period of upheaval and whilst this is true to a certain extent the reality is that the food industry has always had to face up to change – specific issues and trends may vary but change is the norm!
Why is change the norm? In simple terms food intake (calories x population) is relatively stable but consumer behaviour and the demands of those consumers change. This necessitates a response change from producers and retailers as they compete for a larger slice of the market.
Consumer trends don’t change overnight they evolve. One of my favourite statistics concerns the amount of time spent preparing the evening meal: in 1960, 1980 and 2014 time spent was 100 minutes. 60 minutes and 38 minutes respectively. Whilst there is no data, it is safe to assume it is close to 30 minutes today. A 2016 study suggested that people spend more time watching cooking programmes on TV than actually cooking a meal themselves. Perhaps this is a sign that cooking is become a mystical skill that is becoming less and less normalised as we progress through the years.
Drivers of consumer trends come in all directions; tightened family budgets, increased eating out, increasing internationalisation of trends to identify but a few. Just take a look at how M&S have expanded their offering of international ready meals.
Back in the dotcom era the future of the major retailers and how they would respond to the age of online consumerism was an area of much interest. How would they avoid ending up with white elephant property portfolios? Still sound familiar? It would appear that the days of a huge monthly or weekly shop are over and that we are seeing more complex shopping behaviour, for example; online shopping with home delivery combined with increased frequency of convenience shopping along with the regular monthly or weekly supermarket run. Before the advent of the out-of-town supermarkets home delivery (albeit via the telephone rather than the internet) and local shopping were the norm. Yes, the way we shop is changing but this is nothing new.
From a corporate finance perspective the constant changes faced by the food and beverage industry drive mergers and acquisition activity. Back in 2000 the number of reported deals in this industry was 96. This year, to date, there are 93! Change continues, but nothing new!
If you have any questions about any upcoming transactions within this sector please send me an email to firstname.lastname@example.org.