Food and beverage M&A activity is poised for a rebound in 2025, after a slower 2024, fueled by regulatory shifts, economic relaxation and a focus on acquiring innovative brands.
Given the relatively quiet M&A landscape during the 2024 election year, the food and beverage industry can expect to see “high activity for acquisition” during the first couple of years under a new administration, Geoff Coltman, SVP, Catena Solutions, a food and beverage consulting firm, said in an interview with FoodNavigator-USA.
M&A activity will be propelled by political moves, like the Trump Administration’s expected lax regulatory oversight, and a possible drop in interest rates allowing funds to be “more available for organizations if they need a credit line in order to complete the transaction,” he added.
“You have a perfect storm right now of policy, politics, credit and banking,” he said.
Outside of politics, independent food and beverage brands have caught the eye of larger players who see the value of smaller, flexible brands with innovative, differentiated products that can add revenue to their portfolios. An example is PepsiCo’s purchase of Siete Foods for $1.2 billion last fall.
“Siete pushed the boundaries for a long time in terms of using cassava for their products versus corn or flour,” and the acquisition pushed PepsiCo further into the better-for-you snack category, Coltman said.
Smaller brands may not need to prioritize profitability since larger brands often acquire them to boost their own profitability. However, smaller brands have the advantage of carving out new customer segments that larger brands find desirable.
“The bigger brands have to use the adage of if you cannot beat them, buy them,” he said.
‘SKU heroes’ will shape portfolios
From snacks, beverages and food packaging, “companies are identifying what their SKU heroes are,” he said.
“What are their products that make them the most amount of money in revenue or the most profitable?” he added. With this mindset, the industry can expect to see companies shedding SKUs that do not align with their overall strategy. For example, last year Unilever plans to spin off its ice cream business into a separate business due to poor performance in the division and a complex supply chain. The spinoff will start immediately and anticipated to finalize by the end of 2025.
Coltman predicts that moves like Unilever’s will continue throughout 2025 as brands will be “traded like trading cards pretty frequently as portfolios reassess to organizational strategies.”
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As 2025 unfolds, in the wake of Mondelēz International’s unsuccessful attempt to acquire The Hershey Company, Coltman noted that Hershey does not fully align with Mondelez’s portfolio.
While Hershey is predominantly a national chocolate company, it also plays in the snack segment through its acquisition of Dots Pretzels in 2021 and with its fruit snack business. Whereas Mondelēz, a global brand with a portfolio dominated by snacks, could attempt at another bid for Hershey, particularly for its chocolate business, and expand its current roster which includes Cadbury, Milka and Toblerone, Coltman said.
This potential shift could allow Mondelēz to double down on its global chocolate presence while enabling Hershey to focus on further expanding its footprint in the US snack market, aligning with each company’s strengths and strategic priorities, Coltman explained.
If Mondelēz attempts to buy Hershey’s chocolate business, it could be an opportunity for collaboration between the two manufacturers where certain segments could be traded, sold or co-branded, although the latter is more popular among beverages, Coltman added.
Food safety will influence M&A success
Regardless of how companies navigate the nuts and bolts of M&A, food safety quality assurance (FSQA) will be critical in the success of these moves, Coltman noted.
“FSQA is an important part to make sure that everybody is safe, everything is safe, and that the food going out is safe. But if you are acquiring companies, integrating them and then also having to realign your ingredients, chemicals, dies, additives, whatever it is you are using, you have to restructure,” he said.
“There is going to be a lot of stress around the value and worth of those items in acquisition if the end product tastes, looks or smells differently than when it was before,” he added.
