Food and beverage M&A update: H1 2024

H1 2024 food and beverage public market update

Food and beverage public market overview

The food and beverage industry is fast-paced and follows the constant changes in consumer trends. This forces operators to be agile and adaptable to ensure their offerings capitalize on current market demands. Throughout 2024, BT Capital has seen numerous recent trends continue to play out as well as the emergence of some newer trends.

• Consumers are increasingly mindful of nutritional value – There has been a shift away from taste and convenience toward items that contain key ingredients that customers are looking for. Essential nutrients, vitamins and minerals as well as key macronutrients (i.e. – proteins, fats and carbohydrates) are being scrutinized now more than ever.
• Similarly, consumers are seeking food and beverage options that align with their overall health and wellness goals – As diagnoses of chronic diseases such as obesity and diabetes continue to tick upward, consumers are taking preventative measures with their diets to promote a healthier lifestyle. Products that are lower in sugar content, support metabolism, boost energy, increase/support brain and cognitive function, reduce inflammation and improve immune health are realizing significant growth. As a subset of this trend, plant-based foods are continuing to see increased demand.
• Sustainability throughout the supply chain – From responsible sourcing to sustainable farming to animal treatment to recyclable packaging, consumers are increasingly conscious of operators’ environmental footprints. With the rise of the internet and social media, consumers have been given increased transparency into the food and beverage production life cycle.
• Branding is constantly adapting – Whether it is social media influencers promoting a particular brand or product, reviewing a new restaurant, or documenting their dining experiences while traveling, the role of social media marketing continues to drive demand, especially for Millennial and Gen Z consumers. Additionally, companies are strategically using clean, simple branding to highlight key ingredients and health benefits.
• Advances in blockchain technology and artificial intelligence (AI) are generating new use cases in the food & beverage industry – Blockchain technology allows for heightened transparency as manufacturers are able to view ingredient origins and other manufacturing processes and share findings with consumers. Advances in AI provide companies with better forecasting data.

While consumer trends seem to be constantly changing, overall food & beverage public market dynamics remain largely unchanged from the beginning of the year. Persistent inflation, elevated current interest rates, higher inventory levels and high labor costs continued to weigh on performance in the first half of the year. Moving forward, investors are likely to shift their focus to companies that forecast strong volume growth as price elasticity increases.

In the first half of 2024, the BT Capital Food and Beverage Index underperformed both the S&P 500 Index as well as the S&P Food and Beverage Select Industry Index as the agribusiness sub-sector, which accounts for 6 of the 34 companies in the index, realized particularly poor performance. Through Q1 2024, performance improved, with four of the six sub-sectors demonstrating share price gains and the overall index showing mostly flat returns of -0.3%. Performance weakened in the second quarter as economic data points inhibited the Federal Reserve from making any interest rate cuts, which many investors hoped for and anticipated.

H1 2024 food and beverage spotlight

2024 BT Capital Food and Beverage Index performance and select multiples

Valuations showed signs of stabilization in H1 2024 from 2020/2021 peaks, with beverage and snack names showing the strongest multiples of all subsectors.

BT Capital Food and Beverage Index

Median TTM revenue growth rates ( % )

H1 2024 food and beverage M&A insights

Food and beverage M&A insights (U.S.)

Food and beverage M&A activity increased in H1 2024 as many of the economic factors that have tempered activity in recent periods lingered into the period but weakened in severity. Activity during the period was driven by strategic consolidation efforts as well as an improving lending environment due to a clearer interest rate outlook. As the inflation rate stabilizes, many acquirers view the incremental sales volume gains that come with acquiring high-quality assets as an attractive growth strategy. The branded products sub-sector was particularly active in H1 2024, which follows the trend of buyers seeking high-quality assets and products. With the stable lending environment and record amounts of capital waiting to be deployed, we expect a rebound in M&A activity in the food & beverage industry.

Food and beverage M&A activity (U.S.)

Per Capital IQ data, U.S. food and beverage M&A activity increased in H1 2024, with 147 deals closing for a combined value of $5.9B. Deal count in Q1 2024 (69 deals) increased when compared to Q4 2023 (66 deals) and Q1 2023 (62 deals). Deal count in Q2 2024 (78 deals) also increased when compared to both Q1 2024 and Q2 2023 (72 deals). M&A deal value in H1 2024 was $5.9B, representing 46.2% decrease from H2 2023 and a 66.3% increase from H1 2023. Deal value in Q1 2024 was $4.5B compared to $10.7B in Q4 2023 and $1.9B in Q1 2023. It is of note that one deal, The J.M. Smucker Company’s (SJM) acquisition of Hostess Brands, Inc, accounted for more than half of reported deal value in Q4 2023. Deal value in Q2 2024 was $1.4B compared to $4.5B in Q1 2024 and $1.6B in Q2 2023.

Food and beverage M&A activity – deal breakdown (segment)

Food products companies were the most sought after by buyers in H1 2024, accounting for 73% of closed deals in the period while beverages companies accounted for 27% deal volume.

Food and beverage M&A activity – deal breakdown (geography)

California proved to be the most popular state for buyers to pursue deals, with 33 deals closed in H1 2024. Illinois, Pennsylvania and Ohio made up the rest of the top four.

H1 2024 Select food and beverage M&A spotlight

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