Food, Beverage and Agribusiness
Transcript of Food, Beverage and Agribusiness
Food, Beverage and Agribusiness
Move towards normalcyThe first half of 2021 was characterized by continued resilience within the food, beverage and agribusiness (FB&A) industry, following a period of uncertainty through much of 2020. With more visibility on health and safety policies, changing consumer purchasing preferences and areas of sustainable growth, buyers and sellers have been adept at implementing strategic decisions to support their long-term growth plans. While certain foodservice operators struggled to regain their footing, most sub-sectors flourished—particularly those able to benefit from at-home dining and convenience trends—and took share in what appears to be an everchanging market with a strong long-term outlook.
US M&A momentum evidenced a temporary wait-and-see approach, with only three announced FB&A deals over $1 billion during all of 2020, while, according to FactSet, there were 11 announced deals (US targets) valued at more than $1 billion through June 30, 2021. Overall, US FB&A M&A volume hit a record during the first half of 2021 (309 deals), an increase of more than 26% during the same period in 2020. Valuations for quality deals remained at historically high levels, fueled by ongoing private equity fund raising, historically low interest rates and the specter of a Biden administration capital gains tax policy change taking effect in 2022.
Paul Mariani Managing Director Investment Banking
CHART 1: US FOOD, BEVERAGE AND AGRIBUSINESS M&A VOLUME | 2011 – 1H2021
317 330 316
405 404 441 442 477
537
309244
489
$30
$60
$90
$120
$150
$0
600
500
400
300
200
100
–2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 H1’21H1’20
No. of D
eals
Ente
rpris
e Va
lue
($ in
bill
ions
)
No. of Deals<$500m$500m – $1B>$1B
Source: FactSet as of June 30, 2021.
2021: Mid-year review
Mid-year 2021 | Mesirow Investment Banking | Industry Outlook
1
CHART 3: PUBLICLY TRADED FOOD COMPANIES BY SUB-SECTOR — EV / LTM EBITDA
26.0x
21.2x
16.9x 16.7x 16.2x14.0x
9.6x12.3x
10.1x11.3x8.6x
Mea
l /H
ome
Del
iver
y
Ingr
edie
nts
Frui
ts a
ndVe
geta
bles
Baki
ng
Dai
ry
Pack
aged
Food
s
Distribution
and
Who
lesa
le
Inpu
ts a
ndA
grib
usin
ess
Better-for-you
Rest
aura
nts
Reta
il G
roce
ry
Median: 14.5x
22.7x
Cand
y, N
uts
and
Snac
ks
22.4x
Beve
rage
s
8.2x 8.1x
Biofuels
Prot
ein
Source: S&P Capital IQ as of June 30, 2021.
CHART 2: FOOD, BEVERAGE AND AGRIBUSINESS M&A MULTIPLES BY SUB-SECTOR — EV / EBITDA
Beve
rage
8.9x
Cand
y, N
uts
and
Snac
ks
16.9x
13.4x 13.3x 13.2x12.2x
9.4x 9.3x 8.7x 8.6x 8.0x
Prot
ein
Nut
race
utica
ls
Ingr
edie
nts
Cann
abis
Pack
aged
Food
s
Rest
aura
nts
Dist
ributi
onan
d W
hole
sale
Reta
ilG
roce
ry
Inpu
ts a
ndA
grib
usin
ess
Frui
ts a
ndVe
geta
bles
Median: 11.5x
14.6x
Source: S&P Capital IQ as of June 30, 2021. M&A deals with disclosed multiples over latest three years.
TABLE 1: SELECTED FOOD, BEVERAGE & AGRIBUSINESS M&A DEALS (1H 2021)Announced date Acquirer Target Sub-sector Rationale
EV ($mm)
EV / EBITDA
EV / Revenue
Jun-21 Restaurants Diversification $443 11.1x n/a
Jun-21 Grocery Delivery SPAC $887 n/a 4.74x
May-21 Confectionery Brand Dominance $425 n/a 3.64x
May-21
Pet Products, Inc.
Pet Diversification $1,200 n/a 5.00x
May-21 Candy, Nuts and Snacks Brand Dominance $41 5.1x n/a
Apr-21 Spices & Seasonings (PL) Consolidation $950 8.7x 1.23x
Apr-21 Packaged Foods Private Equity $1,000 n/a n/a
Mar-21 Cannabis Vertical Integration $168 16.1x 1.55x
Mar-21North American Bakery Business
Bakery Carve-out $850 n/a 0.56x
Mar-21 Functional Beverage Diversification n/a n/a n/a
Feb-21 Candy, Nuts and Snacks Brand Dominance $3,350 12.5x 3.05x
Jan-21 Candy, Nuts and Snacks Brand Dominance $25 7.4x 1.00x
Jan-21 Bakery Private Equity n/a n/a n/a
Sources: CapIQ and Company announcements. EBITDA multiples are synergy-adjusted where applicable. | Mesirow did not represent any of the acquirers or targets in connection with the transactions noted on this page and is not currently representing any of the listed acquirers or targets.
2
Mid-year 2021 | Mesirow Investment Banking | Industry Outlook | Food, Beverage and Agribusiness
CHART 4: LIVESTOCK COMMODITY PERFORMANCE — LATEST TWELVE MONTHSLean Hogs Live Cattle Broilers
Jun-2020
Aug-2020
Oct-2020
Dec-2020
Feb-2021
Apr-2021
Jun-2021
43.0%33.7%
137.9%
200.0%
150.0%
100.0%
50.0%
0.0%
(50.0%)
Source: S&P Capital IQ as of June 30, 2021.
CHART 5: GRAIN COMMODITY PERFORMANCE — LATEST TWELVE MONTHSSoybeans Corn Wheat
35.6%
98.0%
58.6%
140.0%
120.0%
100.0%
80.0%
60.0%
40.0%
20.0%
0.0%
(20.0%)
Jun-2020
Aug-2020
Oct-2020
Dec-2020
Feb-2021
Apr-2021
Jun-2021
Source: S&P Capital IQ as of June 30, 2021.
Commodity volatility waning?Commodity price volatility reached levels not seen since 2007/2008 as a combination of record fiscal stimulus, working out supply chain bottlenecks and the expectation
that vaccines may eradicate the pandemic-fueled uncertainty in the markets.
3
Mid-year 2021 | Mesirow Investment Banking | Industry Outlook | Food, Beverage and Agribusiness
“ Households of all income levels are reaching for these higher quality, bolder product offerings, whether it be for perceived health benefits or indulgence. ”
Consumers’ perspectives on premium indulgent foods
85%BFY shoppers who say they give in to over half of their cravings for indulgent foods
40%Shoppers who say they expect to pay a premium for healthy and functional snacks
35%Shoppers who reported increasing their snack consumption due to the availability of healthier, more expensive options
Source: Nielsen, FONA International Premiumization Report – 2019, Mintel Research: Progressive Grocer – Its Snack Time, LEK Survey.
As an aside, and in celebration of a move towards normalcy, Mesirow attended the Sweets and Snacks show in Indianapolis in June, which was the first in-person trade show held in that city. The show was well attended and felt like a step in the right direction as we look forward to a number of in-person events throughout the remainder of 2021 (note: we plan to attend Expo East (Philadelphia, September), SupplySide West (Las Vegas, October), and PLMA (Rosemont, December) over the coming months.).
Sector spotlight: Premium indulgent foodsWith strong and continued demand for bold, unique flavors and high quality ingredients, “premiumization” was already “a thing” before the pandemic hit, partially bucking the growing “health and wellness” trend by supplementing BFY demand with “clean label”, “premium”, “authentic” (and in some cases, “not-so-good-for-you”) ingredients. While consumers are still searching for opportunities to stretch the household retail dollar, the premium end of the indulgence continuum has enjoyed sustained long-term demand. From “mocktails” to confectionery products to pet food, packaged food manufacturers across the spectrum are making premium products increasingly available to retailers and consumers. While “value” is still a key consideration for many consumers who view premium products as an occasional treat, the category is steadily growing overall regardless of higher price points. For example, according to IRI, dollar sales for foods containing a (premium) “lifestyle” diet claim grew approximately 13% in 2020.
Consumption demand is not just limited to more affluent buyers. Households of all income levels are reaching for these higher quality, bolder product offerings, whether it be for perceived health benefits or indulgence. Another IRI report found that “low-income households report making small indulgence purchases at a similar rate as other households,” and further noted these households are “most likely to seek premium items and to replace the restaurant experience with quality at-home meals.”
By focusing on quality, unique flavors and functional benefits, premiumization also provides yet another route for both conventional and emerging product development to innovate up and down the spectrum while building market share in both branded and private label, and balancing other consumer values, such as sustainability and corporate stewardship.
Multiples in the indulgent category have caught wind too with median revenue and EBITDA multiples approximating more than 2.00x and 11.6x, respectively, for the CY 2017 – 2021 period.
4
Mid-year 2021 | Mesirow Investment Banking | Industry Outlook | Food, Beverage and Agribusiness
CHART 6: CANDY, NUTS AND SNACKS | DISCLOSED REVENUE MULTIPLES
Acquirer
Target
Rationale
Median1:2.04x
1.00x
C C DCPE/SPAC
C C CD DC DCPEPE D D C C C
2.46x
2.03x
3.56x
2.90x
0.21x
2.90x 2.99x
1.51x
1.91x
1.44x
0.74x
3.15x 3.11x
4.10x
5.00x
2.04x
1.55x
0.73x
2.08x
1st quartile1:1.14x
3rd quartile1:3.11x
EV /
Rev
enue
U.S. Confectionary
Business
Cookies and Fruit Snack
BusinessDSD Snacks
Business
2020 20192021 2018 2017
Note: C: Consolidation; PE: Private Equity; D: Diversification; SPAC: Special Purpose Acquisition Company. | Source: Capital IQ, company filings and press releases.| 1. Based on all deals with disclosed multiples in the Candy, Nuts and Snacks sector from 2017-2021.
CHART 7: CANDY, NUTS AND SNACKS | DISCLOSED EBITDA MULTIPLES
Acquirer
Target
Rationale
7.4x
9.6x
11.6x
2020 20192021 2018 2017
9.4x
12.4x
7.4x
14.3x
6.5x
9.3x
17.3x
14.3x12.7x
20.0x20.7x
14.8x
13.0x
8.4x 8.4x9.3x
11.6x
EV /
EBI
TDA
Median1:11.6x1st quartile1:9.1x
3rd quartile1:14.3x
C C DCPE/SPAC
C C CD DC DCPEPE D D C C C
U.S. Confectionary
Business
Cookies and Fruit Snack
BusinessDSD Snacks
Business
Note: C: Consolidation; PE: Private Equity; D: Diversification; SPAC: Special Purpose Acquisition Company. | Source: Capital IQ, company filings and press releases. | 1. Based on all deals with disclosed multiples in the Candy, Nuts and Snacks sector from 2017-2021.
5
Mid-year 2021 | Mesirow Investment Banking | Industry Outlook | Food, Beverage and Agribusiness
Dedicated advisor to the food, beverage and agribusiness sectorMesirow Investment Banking is consistently focused on elevating the experience for our clients. With extensive sector-specific expertise and deep long-standing relationships, our dedicated Food, Beverage and Agribusiness team has a proven track record of completing highly tailored and successful transactions. Our highest priority is helping individuals and organizations achieve their financial and strategic goals.
Contact usPaul Mariani 312.595.7820 [email protected]
Mesirow refers to Mesirow Financial Holdings, Inc. and its divisions, subsidiaries and affiliates. The Mesirow name and logo are registered service marks of Mesirow Financial Holdings, Inc., © 2021, Mesirow Financial Holdings, Inc. All rights reserved. Mesirow does not provide legal or tax advice. Securities offered by Mesirow Financial, Inc. member FINRA, SIPC. Some information contained herein has been obtained from sources believed to be reliable, but is not necessarily complete and its accuracy cannot be guaranteed. Any opinions expressed are subject to change without notice. It should not be assumed that any historical market performance information discussed herein will equal such future performance. This report is for information purposes only, and should not be considered a solicitation to buy or sell any security.
• Beverages• Branded and private label packaged food• Cannabis• Contract manufacturing• Dairy and dairy alternatives• Distributors and wholesalers• Fruits and vegetables• Ingredients and flavors
• Inputs and agribusiness• Milling, baking and confectionery• Natural and organics• Nutraceuticals• Pet food and feed• Protein• Restaurants and retail grocery• Snack foods
Mesirow serves the following sectors within the value chain:
Notable Mesirow transactionsOutlookWe expect to see the strong trends of the latest twelve months continue through the remainder of 2021 and likely well beyond. The strong supply of FB&A companies contemplating a possible exit will continue to be met by strong demand from strategic buyers that utilize M&A as an essential component to accelerate growth, whether through accessing new channels, customers and/or capabilities critical to executing long-term growth strategies. The return of large-scale (>$1 billion) FB&A transactions announced through the first half of 2021, coupled with relatively active IPO and SPAC markets, is a collective positive tell-tale for the industry overall. With no shortage of capital on the sidelines and the current Fed posture, among a confluence of other factors, we see limited risk this momentum will let up anytime soon. Further, we expect to see private equity firms continue to be aggressive in processes as they balance capital deployment with potential resource constraints, resulting in sterling assets continuing to realize premium valuations.
6
Mid-year 2021 | Mesirow Investment Banking | Industry Outlook | Food, Beverage and Agribusiness
mesirow.com/investmentbanking