Specialty foods M&A update: H2 2019

Overview

Baker Tilly Capital, LLC’s H2 2019 Specialty foods M&A Update provides an overview of the U.S. specialty foods market, industry trends and relevant transactions from July 1, 2019 to Dec. 31, 2019 (H2 2019).

The specialty foods market’s strong growth has led to the segment accounting for 16 percent of the total food market according to the Specialty Food Association (SFA), quickly approaching a point where it will comprise one fifth of the overall food market.  Health & wellness and “better-for-you” continue to be top of mind in consumer purchasing decisions and have provided considerable tailwinds for the recent surge in demand for plant-based foods.  At the SFA’s Winter Fancy Food Show in January 2020, David Lockwood, director of Mintel Consulting, stated that, “Next year 20 percent of the growth [of specialty foods] in terms of number of dollars will come from plant-based foods.”  Focus on overall wellness has also recently led to rising trends in functional products that support mental focus, relaxation and digestive health, so 2020 would expect to see more companies innovating in this space.  

Major food players have been entering the plant-based or meat-alternative space through both acquisitions (i.e. Maple Leaf Foods acquired Lightlife Foods, Inc. in 2017 and Unilever plc acquired The Vegetarian Butcher in 2018) and new product launches (Hormel Foods launched Happy Little Plants and Kellogg Co. launched the Incogmeato brand in September 2019).  Recently, outright acquisitions in the plant-based space have been somewhat limited as potential acquirers are likely waiting to see how the market plays out. There has been no shortage of capital going into the space, however, with many plant-based start-ups receiving significant funding from venture capital firms and food company-backed incubators.  The capital infusions are often a stepping-stone for future M&A, so acquisitions in the space are expected to increase in the next couple of years.  Below are select venture capital investments in plant-based space during H2 2019: 

• Future Meat Technologies (Israel-based cultured meat start-up) raised $14 million in Series A funding, which will be used to build the world’s first cultured meat manufacturing facility
• Tyson Ventures (venture capital arm of Tyson Foods, Inc.) invested in