Organic Industry –
Overview & Global Deals

This report gives a flashlight on recent M&A developments and transactions in Agri, Food & Beverage Industry across 14 countries around the globe. Due to the rising importance of organic Food we put special attention to the development and trends in this part of the F&B market. Developments and key issues from an M&A perspective are covered as well.

Changing consumer tastes and shifting consumer behavior, new technology and digitalization, cheap debt and high levels of cash held by strategic and private equity buyers are driving the market and valuations across the industry. The effects of the amazon/Whole Foods transaction in 2017, e-commerce, the increasing trend in retail to swap branded products for private label, a slow-down in organic growth and shareholder activism are forcing large Consumer Goods companies to strengthen their portfolios, to embrace an agile operating business model and to seek for new markets. Start-ups utilizing the changing marketplace for new offerings.

M&A will remain as a way to pivot the portfolio towards growth-and-improve market structure. The strongest companies are using M&A as well to achieve visionary and strategic goals. The number of mergers and acquisitions among the big consumer goods companies reached a 15-year high in 2017.

Recent, notable examples
Coca-Cola has agreed to buy coffee chain Costa Coffee from UK drinks and hotels group Whitebread for 3,9 billion GBP in August of 2018 to build a strong platform across parts of Europe, Asia Pacific, the Middle East and Africa.

PepsiCo bought the Israel-based carbonated water machine maker SodaStream for 3,2 billion USD in August 2018. SodaStream will be added to PepsiCo`s growing water portfolio while catalyzing the ability to offer personalized in-home beverage solutions.

In May of this year, Nestlé paid 7.15 billion USD for exclusive rights to sell Starbucks line of packaged coffee and tea worldwide.

In August, Frutarom shareholders approved 7.1 billion USD for the merger with USA-based International flavors and fragrances (IFF).

Cannabis will be legalized in Canada for recreational use by October 2018; liked it is allowed already in 7 US-States. Constellation Brands is increasing its stake in Cannabis producer Canopy Growth Corporation, investing another 4 billion USD in the company and taking its overall holding up to 38%. Molson Coors / Canada announced partnership with Canadian cannabis producer Hydropothecary Corporation (Hexo) to create a joint venture that will sell cannabis-infused-beverages.

Heineken signed a deal to acquire 40% interest in CRH Beer / China; CRH Beer parent company CRE (China Resources Enterprise) will buy 0.9% of Heineken shares for 464 million EUR. The goal is to combine CR´s deep understanding of the local market with Heinekens´ brand and marketing capabilities (8/2018).

Smaller consumer goods companies and agile start-ups are capitalizing on millennial preferences and digitalization and getting the attention of bigger companies: i.e., Fonterra has entered a strategic partnership with Berlin start-up Foodspring.

Organic – a globally growing Market

The development of organic food & beverages has been one of the most noticeable trends in the Food industry. 57.8 million hectares of organic agriculture are reported for 2016 and organic products with a total value of almost 90 billion USD were sold globally in 2016 according to data of the Research Institute of Organic Agriculture.

Rapid growth figures fueled by increased demand and the introduction of new innovative products and services have created new challenges for companies across the entire supply chain. Transformation to an organic product portfolio has proven to be difficult for the incumbent producers whereas M&A could be a valuable strategy to climb the latter.

Organic: becomes mainstream in many countries
From the consumer perspective, organic food products are now perceived as staple goods in Western Europe and North America. 90% of all global retail sales with organic food were done in these regions. The times when organic products were considered a specialty items are long gone. Several studies have shown that consumers perceive organic food to be healthier, which has proven to be the main driver of growth in demand. However, increase in demand is also to be attributed to transparency and awareness. Consumers demand transparency, they want to know under which conditions organic products are grown and how they impact the environment.

As growth in demand requires companies to adapt, the market is always developing. We observed several interesting developments in the international market.

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