As demand for organic and natural food continues to increase, food industry leaders look for new ways to attract health conscious consumers. The past few years have seen a pattern of food industry giants acquiring natural and organic food manufacturers to appeal to a growing demographic of consumers looking for healthy alternatives to traditional food staples. Since January 2014, the food industry has seen M&A activity totalling over $300 billion in value globally, with a large section involving natural food manufacturers. The most recent deal is Danone’s $10.4 billion takeover of WhiteWave Foods Co, manufacturer of soy and almond beverages. The acquisition comes at a time when almond and soy milk sales are growing rapidly, with sales over $700 million a year in North America, as consumers switch from traditional milk products to lactose free and low calorie alternatives.
Falling sales of food staples may also be a driving force behind the recent string of acquisitions. In recent estimates, cereal sales dropped 5% from 2009 to 2014 and soda consumption has hit a 30-year low. Facing stagnating and falling sales in key products, food industry leaders began to expand their natural and organic offerings, as well as look for strategic M&A opportunities. This strategy appears to be paying off. Hormel Foods Corp. recently posted a 20% increase in profits following its acquisition of Applegate Farms LLC, a manufacturer of organic meat products. While this trend shows no signs of slowing down, it remains to be seen whether consumers of natural and organic brands will embrace the acquisitions by established food manufactures or if they will simply switch to the next up-and-coming natural food brand.
The author would like to thank Olga Lenova, summer student, for her assistance in preparing this legal update.
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