Investors are hot for natural and organic food and beverage companies, where investments, as well as mergers and acquisitions (M&A), “surged” in 2015, reports Nutrition Capital Network (NCN; San Diego, CA). The company connects investors with companies in the nutrition and health and wellness industry.
“2015 was a record year for equity investments and acquisitions in the nutrition and health & wellness industry, and by no small margin,” said Grant Ferrier, NCN’s founder and CEO, in a press release. “Venture investments more than doubled in agtech, branded food and beverages, and food delivery; in the latter two categories, more than one deal a week was announced.”
NCN’s Transaction Database’s tracked 558 total deals—equity financings and mergers & acquisitions—in 2015. This number is up 46% compared to the number of deals (382) made in 2014 and the 253 deals made in 2013. The database tracks deals in the supplements, natural and organic food, functional food, ingredients, retail and distribution, contract manufacturing, technology, natural personal care, and household goods segments.
NCN breaks down where the action happened.
Of 2015’s deals, 331 were equity financings, which puts the number of such financings up 61% compared to 2014 and represents more than $7 billion invested.
Sixty-nine of these deals occurred in branded food and beverage products—double the number of food and beverage financings recorded in 2014. NCN notes that these deals were mostly for natural and organic products, but also for functional and medical foods. NCN points to Coca-Cola’s $149 million investment in juice company Suja; $120 million worth of investment in Juicero by Kleiner Perkins, Campbell’s Soup, Google Ventures, and others; and $50 million invested in coconut- and almond-themed beverage firms Harmless Harvest and Califia Farms, respectively.
Technology was a hot spot for equity financing. Technology investments accounted for 207, or 63%, of the total 331 equity deals made in 2015. These investments were led by the areas of delivery services (78 deals) and apps & information (53 deals).
“While food-delivery companies are focused on business disruption, the growth in apps has been consumer-driven,” said Mike Dovbish, NCN’s executive director. “Technology companies that provide information, discovery, and resources in health and wellness have proliferated, particularly in niche categories that provide more options for consumers hungry for health-related resources.”
Mergers & Acquisitions
M&A activity was also up by 29% over 2014. M&A activity accounted for 224 of total industry transactions in 2015, compared to 168 in 2014. In total in the food and beverage category, the top-10 listed deals represented $7 billion.
“Strong brands command a higher price,” Ferrier said, pointing to some of the top deals in 2015 by firms such as Krave, Vega, Applegate Farms, Kettle, and Smart Balance. “The industry’s growth rate, plus the increase in investment activity, will create more opportunities for attractive exits in the future,” he predicted.
“According to the NCN Transaction Database, the average sales multiple for a branded food and beverage acquisition increased from 1.7 in 2013 to 2.1 in 2014 to 2.4 in 2015; the average size of a branded food and beverage company acquired increased from $121 million in 2013 to $134 million in 2014 to $163 million in 2015," NCN states.
But dietary-supplement and nutritional-ingredient deals “leveled off” in 2015, NCN says, “perhaps due to uncertainties in the supplement industry.” Another observation: investment is coming at an earlier stage, with Ferrier reporting an “increase in earlier-stage investments by high-net-worth individuals, angel investors, former industry executives, crowd funding, incubators, accelerators, and other alternative-financing models.”
Nevertheless, interest from big food companies is still helping to drive activity, as well as investment from venture and private equity funds and “crossover” investors from technology and biotech, NCN says.