Consumer trends spark merger and acquisition interest

With consumer trends favoring greater fruit and vegetable consumption, the fresh produce industry has come into focus as an attractive sector for mergers and acquisitions.

That is one of the conclusions of a report by Denver-based SDR Ventures, an advisory service firm for mergers and acquisitions.

Consumer demand for convenience and healthy snack products has prompted many produce companies to go beyond a commodity-driven business model and instead embrace a branded, consumer-focused approach, according to SDR Ventures.

The report reviews recent mergers in the industry and considers common acquisition strategies, and includes a performance analysis of public companies in the industry.

“We have interactive discussions going on with CEOs and have been talking with lots of people in this space, and we thought it was not a bad idea to come together with a bit of a summary of what we are hearing and the trends we are noticing,” said Eric Bosveld, SDR Ventures’ director of agribusiness and Agrifood.

Recent mergers/acquisitions:

  • France-based Bonduelle acquired Ready Pac Foods in March; 
  • Borton & Sons Inc. (Borton Fruit) completed a merger in September with Altafresh LLC (Chelan Fresh); and
  • The Wonderful Co. in September announced that its POM Wonderful division purchased Ruby Fresh.

Bosveld said many produce companies have used acquisitions to help secure year-round supply of fruits and vegetables, diversify operations and gain access to innovation.

Transaction activity was robust in 2017 compared to the two previous years, according to the report. Some of the more active North American companies in recent years are Sysco Foods and The Wonderful Co.

Bosveld said underlying consumer trends point to strong continuing interest in mergers and acquisitions in the fresh produce industry.

 

Retail challenge

At the retail level, the headline deal was Amazon.com’s $13.7-billion deal to buy Whole Foods.

Bob Phibbs, New York-based retail consultant and principal in The Retail Doctor consulting company, said retailers and suppliers will face market pressures.

The merger of Whole Foods and Amazon doesn’t appear to be a great fit between the cultures of the two companies, he said.

However, Amazon’s deep pockets and established online access will make it hard for retailers to recapture business.

Although fresh food may be insulated to some degree, retailers will face a shakeup in coming years as Amazon/Whole Foods grabs more of the business for food staples by automatic reorder, he said.

“Amazon doesn’t have to make a profit, and that’s the thing has turned most businesses on its head,” he said, noting the company’s high stock valuation and strong revenues from web services.

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