Food and beverage industry outlook 2024: Key strategies for navigating the year ahead

The food and beverage industry outlook 2024 highlights the key trends and strategic opportunities shaping the sector amidst evolving market dynamics and regulatory pressures. From mergers and acquisitions (M&A) and the Inflation Reduction Act (IRA), environmental and social governance (ESG) and sustainability initiatives and potential impacts of the 2024 election, discover top strategies to overcome challenges and seize opportunities for growth and resilience in the year ahead.

Mergers and acquisitions

In Q3 of 2024, the food and beverage sector saw 149 private equity deals – the highest since 2017. This surge is driven by strategic consolidation efforts as well as 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. Outlook for M&A is positive with many factors falling into place, such as, stabilizing U.S. and global economy, strong U.S. public stock market, lower U.S. inflation and interest rates, expectations of a more favorable regulatory environment and readily available debt from banks and private credit funds.

Macro trends that could drive more food and beverage M&A activity in 2025 include: demographics with Baby Boomer business owners seeking an exit, private equity portfolio company exits – due to pressure from limited partners to deploy dry powder and provide return of capital from sales of existing portfolio companies, non-core divestitures and aligned valuation expectations.

Food and beverage companies should consider capitalizing on these favorable conditions by evaluating strategic acquisitions or divestitures. Understanding valuation trends and aligning business objectives with market dynamics will be critical to success.

The Inflation Reduction Act (IRA)

Unlike previous regimes, both for-profit and not-for-profit entities can benefit from IRA tax credits. There are three main ways to utilize the credits:

1. Direct use: Owners can apply the credit against existing income, which is useful during profitable years.