Food and beverage M&A update: Q1 2020

Major U.S. indexes

Stocks in the first quarter of 2020 (Q1 2020) fell victim to the COVID-19 pandemic that led to a decline for the broader U.S. equity market, as the S&P, DJIA and NASDAQ closed down -20.0 percent, -23.3 percent and -14.2 percent, respectively, for the quarter. For the 12 months ending March 31, the S&P, DJIA and NASDAQ closed down -8.8 percent, -15.5 percent and -0.4 percent, respectively.

Food & Beverage relative performance

As of March 31, 2020, three of the five food & beverage segments exhibited decreases on a trailing twelve months basis. The other two segments experienced modest gains of less than 1%. As a whole, markets in Q1 2020 experienced selloffs as investors responded to the rampant global spread of COVID-19. In the first three months of 2020, the Federal Reserve slashed interest rates, the federal government injected $2+ trillion worth of fiscal stimulus into the economy, many Americans effectively received shelter-in-place orders, and consumer spending decreased significantly, as the virus led to an economic plummet.

The stocks of the agribusiness segment performed the worst of the five food & beverage segments. This segment exhibited annual declines of 29.4 percent. The segment’s constituents have been significantly impacted by the sharp decline in commodity pricing and the lack of direct stimulus as the U.S. Agriculture Department deliberates how best to allocate billions of dollars in stimulus funds across the agribusiness industry. Additionally, the forced closure of most restaurants deteriorated demand for many agribusiness-related products and left suppliers with product surpluses and facing labor shortages. Overall, coronavirus-related disruptions derailed what was supposed to be a more stable period for agribusiness constituents and left the sustainability of many in limbo as the impact of the virus continues to develop.