{"id":10670,"date":"2023-09-12T11:01:53","date_gmt":"2023-09-12T11:01:53","guid":{"rendered":"https:\/\/prosfunds.com\/news\/u-s-food-companies-go-deal-hunting-as-pandemic-growth-fades\/"},"modified":"2023-09-12T11:01:53","modified_gmt":"2023-09-12T11:01:53","slug":"u-s-food-companies-go-deal-hunting-as-pandemic-growth-fades","status":"publish","type":"post","link":"https:\/\/prosfunds.com\/?p=10670","title":{"rendered":"U.S. food companies go deal hunting as pandemic growth fades"},"content":{"rendered":"
\n

By Deborah Mary Sophia<\/p>\n

(Reuters) – U.S. packaged food companies are set for a flurry of deals in a push to revamp their brand portfolios as their pandemic-era fortunes fade and benefits of price hikes start to taper off.<\/p>\n

Last month, Campbell Soup <\/span><\/span> (NYSE:) struck a $2.7 billion deal for Rao’s sauce maker Sovos Brands. Unilever <\/span><\/span> (LON:) bought premium frozen yogurt brand Yasso in North America, while Snickers maker Mars acquired healthy foods maker Kevin’s Natural Foods. <\/p>\n

“There’s been a nice uptick in M&A (mergers and acquisitions) in the food industry in the first half of the year…,” said Michael Milani, executive managing director and principal at advisory firm Baker Tilly.<\/p>\n

“It has been a big theme, and we expect that to continue in the back half of 2023 and into early 2024.”<\/p>\n

This is despite higher borrowing costs straining companies looking for acquisitions. <\/p>\n

The value of deals in the U.S. food and beverage industry slipped nearly 3% to about $10.39 billion this year, according to LSEG data. But their volumes climbed 17.5% to 248 as of Sept. 1, making the industry a bright spot in dealmaking.<\/p>\n

The total number of deals across all industry sectors slid 4% in the same period, data showed.<\/p>\n

“Large food companies need to add more new concepts, new flavor profiles and new food items because their old brands – though still growing – are not growing at a meaningful rate,” Milani said.<\/p>\n

The rise in deals comes as volume of sales at companies such as Kraft Heinz (NASDAQ:) and Campbell fell for at least the past six quarters due to weak demand, while benefits from price hikes also fade.<\/p>\n

“I would expect there to be a continued drumbeat of M&A,” said Sarah Henry, managing director and portfolio manager at Logan Capital Management, which holds shares in PepsiCo (NASDAQ:) and Mondelez (NASDAQ:) International. <\/p>\n

Packaged food companies “are now faced with some difficult comparisons on organic (sales) and are seeking some strategic, category-specific M&A targets that will propel them through the next few years,” Henry said.<\/p>\n

Cheerios cereal maker General Mills <\/span><\/span> (NYSE:) has pinned M&A as a key goal in the coming years, with executives saying it is a “good environment for M&A right now.”<\/p>\n

For Mondelez, bolt-on acquisitions are the way to go, the Oreo maker’s finance chief Luca Zaramella had recently said at a Barclays conference. <\/p>\n

Last month, Reuters reported that Twinkies snack cakes maker Hostess Brands (NASDAQ:) was exploring a sale and that Mondelez and Hershey could be in the race to buy it. <\/p>\n

J.P. Morgan analysts said they could be eyeing Hostess to expand outside of North America.<\/p>\n

“Most of the large cap packaged food companies have … diligently reduced their debt and improved their balance sheet (through the pandemic)…so they have the risk capacity and risk appetite to pursue large-scale acquisitions,” CFRA Research analyst Arun Sundaram said.<\/p>\n

“These packaged food companies need to continue finding ways to stay relevant … And so one of the easiest ways to do that is through M&A.” <\/p>\n<\/div>\n

Read the full article here<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

By Deborah Mary Sophia (Reuters) – U.S. packaged food companies are set for a flurry of deals in a push to revamp their brand portfolios as their pandemic-era fortunes fade and benefits of price hikes start to taper off. Last month, Campbell Soup (NYSE:) struck a $2.7 billion deal for Rao’s sauce maker Sovos Brands. 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