Newsletter – April 2017
Thursday, 6th April 2017
M&A Partners Newsletter
With the June 2017 year end fast approaching, M&A Partners wish to update you on our activities, as well as share with you some insights into the Health & Wellness and Organic segments of the consumer goods market following some of our recent transactions.
Current M&A Partners Activity in the Australian/NZ Food Sector
We have recently completed the sale of Kadac Pty Ltd on behalf of the Besen Family and other founding shareholders, to a major multinational group. The sale followed a three month bid process with the business keenly sought by local private investors and trade buyers. Kadac is Australia’s largest distributor of organic, health & wellness products. The China based buyer see’s significant opportunity for growth in the business domestically and throughout Asia.
The sale of Kadac followed on from the successful sale of NY Bagels to Pinnacle Foods (a division of Pacific Equity Partners (PEP)) and the sale of Fleming’s NZ snack bar business (a division of PepsiCo) to ProLife Foods in NZ. We acted in both instances for the vendors and ran a competitive sale process.
We have recently been engaged by a ‘ready to eat meal’ company that is seeking capital to accelerate growth. The business is experiencing considerable demand for its product across independent channels, whilst currently being trialled in the majors. We expect an IM will be available within the next month
There is currently significant activity in the at home/preprepared meals segment as innovative new business models emerge, challenging a distribution network which has been largely unchanged for 60 years. Increasing health consciousness among time poor consumers is driving the push for convenient, nutritious and cost effective meals to become available via a number of nonconventional distribution channels. Chilled ready meals continue to increase it’s market share in the ready meals segment and is forecast to grow at 8.1% CAGR through to 2021.
We see a number of trends emerging in the FMCG sector including:
- The health & wellness food category is performing strongly with organic packaged foods growing at 14% CAGR – almost 6 times the growth of general categories
- Increasing demand and consumer interest in functional drinks. Examples include Remedy Kombucha, Shine+ and Kreolsparkling
- Increasing demand for imported innovative healthy snacks from around the world e.g. Simply 7 and Calbee Increasing demand for prepacked and ready to eat meals e.g. YouFoodz and Fivepointfour
- Disruption in conventional meal distribution channels with B2C and nonconventional retailing growing rapidly e.g. Hello Fresh, Marley Spoon and Pepper Leaf
- Increasing pricing spreads between best value and best quality (premium) products
- Excitement and uncertainty in regards to new international entrants such a Lidl and Amazon Fresh
During our engagement with Kadac we have seen firsthand the strong consumer demand for Health & Wellness and Organic products and researched the characteristics of over 50 leading brands in the sector.
With revenues of over $15b at retail, the Australian Health & Wellness food & beverage market will continue to grow in importance over the next 5 – 10 years as consumers increasingly seek healthy, safe and innovative products. The highest growth categories in Health & Wellness market are Organic and Food Intolerance products with last threeyear CAGR’s of 14.1% and 20.8% respectively.
In the US we have recently seen major FMCG drinks businesses enter the functional drinks segment via mergers and acquisitions. The factors driving this thematic are the taxes on sugary drinks and consumer behaviour away from artificially flavoured or sweetened drinks. Recent acquisitions in the US (indicative of some opportunities in Australia for niche drinks companies) include:
- Pepsico acquires Kevita (November 2016) – Pepsico agrees to fully acquire sparkling probiotic drink maker KeVita for ~USD$200m
- CocaCola acquires Ades (June 2016) – CocaCola acquired Ades, the second largest global maker of soybased beverages from Unilever for ~USD$575m
- CocaCola takes minority investment in Suja (August 2015) – CocaCola has taken a minority 30% investment in one of the US’s leading organic, cold pressed juice brands, Suja for ~USD$90m
- Jusu Bars acquires Cru Juice (September 2016) – Jusu Bars acquired Cru Juice which blends and bottles raw and coldpressed juices for an undisclosed amount
- Country Pure Foods acquires The Ridgefield’s Brand (June 2016) – Country Pure Foods acquired fruit juice producer The Ridgefield’s brand.
M&A Partners actively work with Australian food and beverage businesses to raise capital and seek exit strategies for their businesses. The demand from major FMCG businesses to acquire fast growing and innovative businesses, particularly in the Health & Wellness and Organic categories is presenting opportunities for owners to achieve attractive valuations for capital raising and high exit multiples.
Please contact Antony Lynch, Paul Nemets or Alan Dassie if you would like to talk confidentially about your business or its growth & funding options.
Antony Lynch Director
m: 0419 919 722
Paul Nemets Associate
m: 0432 815 362
Alan Dassie Analyst
m: 0423 612 603