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M&A Trends: A Healthier Way in Food and Beverage

The latest transaction news from the food industry is Nestlé’s sales of their candy business to Ferrero, which is valued at $2.8 billion dollars. This move by Swiss giant, Nestlé is a continuation of the health food trend and M&A trends where companies consolidate and divest in an effort to recalibrate portfolios towards growth strategies.

M&A Trends – Transforming and Adapting for Healthier Consumers

As food companies struggle with lower single-digit growth rates in traditional channels, leading players are looking to transform and adapt to changing consumer preferences, particularly in the healthier segments. Clarkston Consulting recently wrote another piece on consumer food trends, highlighting how food and beverage manufacturers are tapping into personalized foods and meal-kit delivery to provide healthier food options for consumers.

Although the candy market growth globally has remained consistent to traditional food and beverage growth rates, premium brands, such as Lindt and Godiva, have demonstrated stronger growth. Mid-market and low-cost brands have significantly eroded their overall market share. In the food and beverage industry, one of the distinct M&A trends is the focus on aligning product portfolio to future consumer demands.

The shift is clear; as Nestlé divests staple confectionary brands such as Babe Ruth and Butterfinger, they plan to use this influx of capital to acquire Atrium Innovations, a vitamins and supplements company. The move by Ferrero makes them the third largest candy company in the world behind Mars and Hershey’s. This acquisition will help Ferrero improve their buying power within the strategic US strategic market and expand distribution channels.

Challenges Ahead for Ferrero and Nestlé

There will still be challenges ahead in the short term for Ferrero and Nestlé. For Nestlé, creating a new brand is significantly much more complex than sustaining brand value, even if the new brand is aligned with industry trends. Buying and divesting the right portfolio to align with your strategy is paramount to succeed in an ever-changing customer demand environment. As you transform your business to target a health-conscious sector as Nestlé is doing, it is important to have the discipline to stick with your pre-deal strategy to achieve expected results.

For Ferrero, capitalizing on new opportunities related to scale, volume, and greater distribution control, will require a seamless integration of these new brands. The importance of a successful business unit integration across sales, marketing, manufacturing, distribution and information technology is extremely important in a deal this size in an industry with such a low margin for errors.

At the same time, while both companies must focus on the success of their divestiture or acquisition, they also need to continue to run their business. Success depends on a smooth transition from deal-sign-off to integration execution; this handoff is the difference between exceeding value targets or failing results.

If you want to understand M&A trends or are looking for help with the right industry expertise for an acquisition, divestiture, merger or achieving your growth or business transformation strategy, contact Clarkston Consulting today.

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Tags: M&A, M&A Integration, M&A Integration Planning