Food and Beverage Recap - Q1 2019 Consumer Analyst Group of New York Conference The Consumer Analyst

Food and Beverage Recap - Q1 2019 Consumer Analyst Group of New York Conference The Consumer Analyst
Food and Beverage Recap - Q1 2019 Consumer Analyst Group of New York Conference The Consumer Analyst
Food and Beverage Recap - Q1 2019 Consumer Analyst Group of New York Conference The Consumer Analyst
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Transcript of Food and Beverage Recap - Q1 2019 Consumer Analyst Group of New York Conference The Consumer Analyst

  • First quarter 2019

    Food and beverage recap

    Key themes from Consumer Analyst Group of New York Conference

    The Consumer Analyst Group of New York Conference (CAGNY) was held in February 2019. This annual event sees the largest global consumer packaged goods (CPG) companies convene to discuss strategic direction and the ever-elusive search for growth. This year, 31 food and beverage and consumer products companies presented their strategies to investors. There are several notable themes that arose from the presentations, many of which we have discussed before in these publications, but are good reminders of the current state of the food and consumer products industry.

    Consumer-driven new product development As we have discussed in recent quarterly recaps, today’s consumer demands products that are natural, healthy and convenient. The attendees at CAGNY reiterated that these demands are driving new product innovation. Specifically, the following trends are of note: • Digestive wellness – functional food with

    health purposes • Plant-based products – enhance taste

    elements of plant-based products • Sugar re-invented – emphasis on natural,

    no-added sugar and preservatives • Snack-ification – convenient, healthier and

    for the moment

    CPGs are establishing broader new product development ecosystems, using consumers and other partners to accelerate the process. For example, global ingredients company Ingredion

    highlighted the co-creation with consumers of on-trend products such as low-sugar drinkable yogurt, indulgent spreadable cheese, gluten-free pizza dough, fibre- added multigrain bread and non-GMO chickpea flour pasta. Many CPGs have also established their own incubator programs or venture arms to invest in early-stage innovative start-ups.

    Leveraging brands across adjacencies CPGs have spent decades developing portfolios of strong brand names. Many are now leveraging the strong foundation of their brands to move into adjacent product categories to gain new market share and accelerate growth. For example, Mondelez is leveraging its globally recognized Oreo cookie brand to move into adjacent categories such as snacks, yogurt and ice cream. Another strong example is J.M. Smucker’s Jif peanut butter brand. J. M. Smucker recognized that the peanut butter category is relatively mature, but has developed adjacent products, such as Jif Power Ups (a granola bar snack product), that leverage the Jif brand and market popularity in a higher-growth category.

    Portfolio optimization & acquisitions The portfolio-shifting strategies that CPGs have undertaken over recent years were a consistent theme across presenters at CAGNY 2019. Capital continues to be allocated to acquisitions, and we have seen numerous CPGs make acquisitions that are smaller in size but are in niche or high- growth segments.

    Larger portfolio shifts are often supported by divesting of non-core or underperforming assets. A relevant example is Kellogg’s recent divestiture of well-known cookie brands Keebler, Famous Amos and Mother’s among others, to focus on the snack and cereal segments.

    Purpose driving profits Presenters spoke to the strong correlation between purpose and long-term business performance. Purpose relates to a commitment to environmental, social and corporate governance. Consumers are demanding sustainability and transparency and consumers view their selection of products and brands as an extension of their own personal values. Consumers want to align themselves with brands and companies they can stand behind. Operating a business with purpose has been proven to drive profits and is seen to be a sustainable source of growth. For example, Danone’s purpose-led Manifesto brands, which are committed to “protecting and nourishing the health of people and the health of the planet”, are growing three times faster than the average. Currently, Danone has 40 brands in the Manifesto program, with the ultimate goal of having all of Danone’s brands being a Manifesto brand.

    Overall, what is clear is that achieving growth is not a simple problem to solve, and keeping up with a changing world and evolving consumers requires agility, flexibility and creativity.

    Stephen Dewis Canadian Food and Beverage Leader Toronto, Ontario | +1 416 943 2063 | stephen.dewis@ca.ey.com

  • Food and beverage recap First quarter 2019 | 3Data source: Capital IQ Inc.

    All currencies in US$ unless otherwise stated.

    Alcoholic beverages

    • Metairie, LA-based Sazerac Company, Inc. acquired 19 spirits brands from Star Industries and The Black Prince Distillery, Inc. The financial terms of the transaction were not disclosed.

    Star Industries, based in Syosset, NY, is an importer and supplier of wine and spirits. Black Prince Distillery, based in Clifton, NJ, operates as a contract bottler and supplier of a complete line of distilled spirits products.

    • Leuven, Belgium-based Anheuser-Busch InBev SA/NV entered into an agreement to acquire Cutwater Spirits, LLC. The financial terms of the transaction were not disclosed.

    Cutwater Spirits, LLC, based in San Diego, CA, produces craft whiskey, vodka, gin, rum, liqueur, mixers and canned cocktails.

    Bakery

    • Castleton-on-Hudson, NY-based Cell-Nique Corporation entered into an agreement to acquire Dancing Deer Baking Company, Inc. The financial terms of the transaction were not disclosed.

    Dancing Deer Baking Company, Inc., based in Boston, MA, produces baked food products such as brownies, cookies, squares, cakes and others.

    Beverage

    • Stamford, CT-based Nestlé Waters North America Inc. acquired a bottling facility from Ice River Springs Water Co. Inc. The financial terms of the transaction were not disclosed.

    Ice River Springs Water Co. Inc., based in Shelburne, Canada, is a private label bottled water producer for retail and food service operators and manufacturer of the Ice River Green brand of bottled water.

    • Montreal, Canada-based Claridge, Inc entered in an agreement to invest in 49th Parallel Roasters Inc. The financial terms of the transaction were not disclosed.

    49th Parallel Roasters Inc., based in Vancouver, Canada, engages in direct trade sourcing, micro-roasting and selling speciality grade coffee products.

    • St. Louis, MO-based Ronnoco Coffee, LLC acquired Beverage Solutions Group. The financial terms of the transaction were not disclosed.

    Beverage Solutions Group, based in Tennessee, operates as a seller of coffee equipment and supplies as well as soluble hot beverages to distributors that service convenience stores and foodservice accounts across the country.

    • Austin, TX-based Peak Rock Capital acquired the Turkey Hill business of The Kroger Company. The financial terms of the transaction were not disclosed.

    The Turkey Hill business of The Kroger Company, based in Conestoga, PA, manufactures iced teas, fruit drinks, milk, frozen dairy treats and ice cream products.

    Dairy

    • Warren, MI-based Lipari Foods, LLC acquired Troyer Cheese, Inc. and Amish Wedding Foods, Inc. The financial terms of the transaction were not disclosed.

    Troyer Cheese Co., based in Millersburg, OH, manufactures and sells cheese, meats, butter and other specialty items. Amish Wedding Foods, Inc., based in Millersburg, OH, produces fruit butter, jam and jellies, mustards, peanut butter, and cider.

    • Des Moines, IA-based Midwest Growth Partners, LLLP acquired Maytag Family Farms, Inc. The financial terms of the transaction were not disclosed.

    Maytag Family Farms, Inc., based in Newton, IA, produces and sells cheese products, such as blue cheese, white cheddar, cheese spreads, and popcorn.

    • Montreal, Canada-based Saputo Inc. acquired Dairy Crest Group plc for approximately $1,580 million. The transaction represents an enterprise value that is approximately 13.8 times EBITDA and 2.6 times revenue, respectively.

    Dairy Crest Group, based in Surrey, United Kingdom, processes and markets branded dairy products in the United Kingdom and internationally.

    Food ingredients

    • Middleton, WI-based SACO Foods, Inc. acquired California Sun Dry Foods Inc. The financial terms of the transaction were not disclosed.

    California Sun Dry Foods Inc., based in Danville, CA, supplies sun-dried tomato products.

    • Minneapolis, MN-based Pipeline Foods LLC acquired the Specialty and Organic Soy and Corn Business of SunOpta Inc. for $66.5 million. The transaction represents an enterprise value that is approximately 8.8 times EBITDA and 0.6 times revenue, respectively.

    The Specialty and Organic Soy and Corn Business of SunOpta Inc., based in Mississauga, ON, supplies non-GMO-based organic food ingredients.

    Foodservice distribution

    • Houston, TX-based Sysco Corporation entered into an agreement to acquire Waugh Foods, Inc. The financial terms of the transaction were not disclosed.

    Waugh Foods, Inc., based in East Peoria, IL, operates as a food service distributor, offering various products, including appetizers, bakery products, and beef, and has sales of $40 million.

    • Richmond, Virginia-based Performance Food Group Company entered in an agreement to acquire Eby-Brown Company, LLC. The financial terms of the transaction were not disclosed.

    Eby-Brown Company, LLC, based in Naperville, IL, distributes pre-packaged candy, snacks, specialty beverages, and tobacco prod