U.S. packaged food makers bulk up on smaller brands in quest for growth

Oatly AB

27/04/2022 18:37

By Praveen Paramasivam
    April 27 (Reuters) - Niche U.S. packaged-food brands facing
a funding crunch are emerging as attractive targets for bigger
players such as Kraft Heinz  KHC.O  and Mondelez  MDLZ.O , which
are looking to expand their product lineup in a highly
competitive market.
    Many early investors are tightening their purse strings due
to rising interest rates and the economic impact of the
pandemic, forcing several smaller companies to consider M&A as
the next viable step.
    "Smaller companies (are) wanting to shore up their balance
sheets given the challenging inflation dynamics, so they are
looking to partner for safety," said Charles Coristine, chief
executive of popcorn and mini cookies maker LesserEvil.
    Pet food brand PetPlate told Reuters that it received more
calls from bankers regarding potential takeover offers so far
this year than it did in the whole of 2021.
    "We get approached about once per week from an investment
bank representing the strategics, and that's compared to once a
quarter last year," PetPlate CEO Gertrude Allen said.
    Canadian plant-based foods maker Above Food said based on
current trends, it was expecting to field more calls about a
possible takeover this year than it did a year earlier.
    Deal-making in the U.S. food and beverage sector jumped 18%
in the first three months of the year, according to data firm CB
Insights, despite 2021 being a record year for mergers and
acquisitions.
    "Now that balance sheets have been restructured and
valuations have come down across the market, we could see larger
packaged food companies pursue more bolt-on acquisitions or even
large-scale acquisitions," CFRA Research equity analyst Arun
Sundaram said. 
    Earlier this week, Toblerone maker Mondelez said it would
spend $1.3 billion for Mexican breadmaker Grupo Bimbo's
 BIMBOA.MX  confectionery business, Ricolino, its second
billion-dollar deal this year.  urn:newsml:reuters.com:*:nL3N2WN2DG
    Meanwhile, Hershey  HSY.N , which acquired Lily's and Dot's
Pretzels last year for $1.2 billion, told Reuters that M&A would
continue to play an important role.  urn:newsml:reuters.com:*:nL4N2S13HH
    "The largest food companies in the world today really need
to continue to reinvent themselves. And probably one of the best
ways to do that is through M&A," Farmer's Dog CEO Jonathan Yoni
Regev said.

 (Reporting by Praveen Paramasivam in Bengaluru; Editing by Anil
D'Silva and Aishwarya Venugopal)
 ((Aishwarya.Venugopal@thomsonreuters.com;))