Food and beverage

Overseas investors' appetite continues in F&B

Trefor Griffith Trefor Griffith

Overseas investors' appetite for UK food and beverage companies has continued to increase, with 2016 recording the highest level of activity for three years.

Our latest edition of Bite Size, a quarterly overview of activity in the UK food and beverage (F&B) sector provides analysis of M&A activity in the fourth quarter of 2016 and the year overall and looks ahead to the trends influencing the market in 2017.

Unsurprisingly, the UK’s decision to leave the European Union remains a dominant theme and with the shape of the negotiations and the post-Brexit landscape still unknown, the only real certainty is more uncertainty.

Trefor Griffith, Head of food and beverage at Grant Thornton UK LLP commented on the findings: "2016 has been a solid year for M&A activity in the food and beverage sector. Despite seeing a fall in both the number and the total disclosed value of deals compared to last year, 2016 is still the second busiest year in terms of activity that we have seen since 2007. Given the level of uncertainty in the market in 2016 amidst the EU referendum, which appears to have prompted the slight dip in transactions in the second quarter, this strong result once again displays the robust nature of the sector.

We also take a look at the potential increased costs arising from customs duty in the worst-case scenario where the UK has no free access to the EU market and tariffs are also imposed by the UK on imports from the EU.

M&A activity

Despite the uncertainty both ahead of, and in the aftermath of the Brexit vote, deal activity in 2016 in the F&B sector remained solid

The areas of the sector drawing the most activity in Q4 were consistent with the previous quarters:

Convenience cravings increasing

The demand for convenience was one of the drivers behind a number of deals in the crisps and snacks, as well as the food-to-go sectors.  The trends for healthy snacking and gluten-free products also drew M&A activity.

The pull of protein

The protein sector remained an active sector for M&A in 2016.

Alcohol acquisitions

Consumer demand for craft beer and artisan spirits continues to increase, and is reflected in the high level of M&A in the alcoholic beverages sector. The artisan gin sector, in particular, has undergone an unprecedented boom in the past year or so.

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