food and beverage manufacturers expect Executives will be asked to be “more prudent and strategic” when it comes to M&A in 2024, as they face challenges that are likely to curb their appetite for taking on riskier deals.
Lewis Biscotti, head of the food and beverage group at state-run accounting and advisory services firm Markham, said there was a growing reluctance among consumer goods companies to make too bold acquisitions. He said businesses will look to buy in trending categories such as snacks, frozen foods and other healthy foods in the new year.
“You’re now starting to look at all the different challenges that are out there.” Biscotti said. “They will act more carefully and strategically.”
Companies are facing headwinds These include reduced product volumes, rising wages, inflation, supply chain disruptions, a slowing job market, and rising interest rates. The White House has also shown a trend toward closer scrutiny of deals across industries, including food, due to antitrust concerns, which could cause CEOs to refrain from making deals they otherwise would.
said Jeff Harmening, CEO of General Mills, the maker of Nature Valley bars and Cheerios. There will be “discipline” regarding acquisitions.. He told Wall Street last September that he was in no hurry to close deals to offset the Minnesota-based company’s weak sales.
“When it comes to M&A, we don’t play short-term. We go and buy the brands we like. We keep them for the long term. We nurture them.” hunning Added. “We’ve been doing it for 165 years, and we’re going to continue to do it. So what we’re not seeing is volume going in a certain direction, so we have to close that gap. I mean, that’s not really part of our plan.”
Erin Rush, director of consumer equity research at Morningstar, said most companies would be more likely to focus on growing their existing portfolios in the current environment. He said deals in 2024 are likely to mirror last year’s situation, with companies making acquisitions to enter niche categories or geographies “rather than transform and change their financial outlook or competitive position.” He said he was looking into it.
Once known for its penchant for big transformational deals, the food and beverage industry over the past six years has seen a shift toward so-called “bolt-on” deals that further increase a company’s presence in a particular category without burdening them with large amounts of debt. ” has mainly focused on trading. .
ConAgra Brands CEO Sean Connolly said the Chicago company remains focused on improving its balance sheet. Acquired Pinnacle Foods for $10.9 billion in 2018Healthy Choice, Marie Callender’s, Birds Eye, and Duncan Hines all under one roof.
“We are focused on continuing to pay down our debt. And when the time comes for us to be able to add something to our portfolio, it is likely to be frozen foods and snacks, which are key strategic areas for us.” is.” he told analysts in October.
Some companies are already falling behind because they can’t innovate fast enough, and many are turning to M&A as a way to fill gaps in their portfolios. This is expected to continue to be a major catalyst for activity in the new year.
Two of the biggest deals in the food space last year were with companies looking to fill gaps in their portfolios.
JM Smucker spent nearly $6 billion to acquire Hostess Brands to expand its presence in convenience-oriented luxury categories and consumer opportunities.
And in August, Campbell Soup Co., which already owns Prego Co., announced plans to buy Sobos Brands Co., which owns the high-end pasta sauce brand Lao Co., for $2.7 billion. The deal was delayed until mid-year after the U.S. Federal Trade Commission asked CPG companies for more information about the deal.
The deal also includes Coca-Cola’s $5.6 billion acquisition of the rest of the healthy sports drink Body Armor it didn’t already own in 2021, and Mondelez International’s acquisition of the healthy bar maker. The agreement follows similar deals in the sector. cliff A year from now, it will be at least $2.9 billion.