The trends that have pervaded 2017 show no sign of slowing down in 2018. Businesses in the health and wellbeing space, as well as those that meet consumers’ demand for more convenient and premium products, will continue to drive M&A activity.

One company currently in the M&A spotlight is Graze. The firm has reportedly hired advisors to navigate a sale of the business for current private equity backer Carlyle. Other deals in the pipeline include a potential merger between Burton's Foods and Fox's Biscuits, and ownership changes for Young's Seafood and Maximuscle.

Chief executives on the move

A further catalyst for M&A recently has been the significant level of change in Chief Executives at the helm of some of the biggest groups in the sector. From Nestle at the start of 2017, General Mills in June and Kellogg and Mondelez in the Autumn, this new blood will undoubtedly mean new strategies for growth and investment, alongside a review of portfolios and heritage businesses.

Defensive consolidation and increased efficiencies 

However, it is worth acknowledging the challenges set to continue to impact F&B investment this year. Sector slowdowns and changes in workforces will lead some to focus on defensive consolidation in 2018.

For instance, bread sales have continued to fall across 2017; with total sales reducing by 12% over the past five years. There is still a market for such products but manufacturers are looking to increase their efficiency or ease their competition.

Consolidate to increase economies of scale

A need for consolidation is driving the rumoured talks between biscuit makers Burton's Foods and Fox's Biscuits. In a slowing market for their products, merging the two groups would reduce competitive pressure and allow greater economies of scale to protect both businesses.

Brexit-fuelled workforce decline impacts F&B sector

Another threat comes from the workforce decline across the UK. Of an estimated 400,000 people working in F&B in the UK, a third are EU nationals or otherwise born overseas. This group have been steadily dropping since 2016’s Brexit referendum, in part due to the lack of clarity on the future of European workers in the UK¹. For many, the UK is increasingly seen as a less attractive place to work.

Food manufacturers are already feeling the effect of this, particularly farmers looking for seasonal workers. Those struggling to source staff could see M&A opportunities slip past them as they struggle to achieve sustainable growth.

A watching brief on EU worker's rights

We will be carefully watching government legislation on EU workers’ rights moving through 2018. M&A activity has been strong throughout the past 12 months and a wealth of new decision makers will look to ensure this continues well into the future.  

If you would like any further information about upcoming deals and opportunities in the food and beverage sector, please contact Trefor Griffith.

References

1. Office for National Statistics, Migration Statistics Quarterly Report: August 2017