Top Food and Beverage Companies for 2009: Licking the Recession
Nestle's stellar performance tops our annual ranking of the 100 largest food and beverage processors in the U.S. and Canada.
By Dave Fusaro, Editor in Chief | 08/03/2009
With its December 2007 acquisition of FPI Ltd., High Liner Foods. doubled in size and bows this year at No. 97.
Acquisitions Slowed in 2008
Source: The Food Institute
The full report, “Food Business Mergers & Acquisitions 2008,”
can be previewed and bought from the Food Institute at www.foodinstitute.com/manda.cfm.
To no one’s surprise – and following two consecutive years of growth -- merger and acquisition activity in the food industry declined approximately 8.5 percent in 2008, with 35 fewer mergers completed last year than in 2007, according to the Food Institute.
However, activity by true food processors actually increased by a third, to at least a six-year high of 129 deals, with 11 more announced but not completed by year end. The Food Institute defines the food industry broadly, including in its analysis agricultural cooperatives, packaging and equipment suppliers, restaurants, retailers and other categories. In 2008, as in most years, food processors were the busiest.
Within the food processor category, multi-product companies effected the most mergers and acquisitions (also an annual leader), totaling 30, followed by brewers/distillers/wineries with 11 deals and meat companies with 10.
There was a sharp drop in investment firms and banks buying food companies, also probably no surprise given their instability, the global recession and the tightness of credit.
“It is difficult to estimate how much the severe global financial troubles affected the merger and acquisition activity within the food industry in 2008, particularly because the floor did not drop until the fourth quarter of the year,” said the report. “Also … many deals were already in the works prior to November, and to cancel any deals may have resulted in substantial monetary penalties.
“Skyrocketing commodity costs also may have contributed to apprehension on the part of purchasers involved with food industry merger and acquisition activity. Though it is impossible to clearly draw connections between the economic turmoil of 2008 and its effects, it is evident that investment firms and banks, which cast a large shadow on the food industry in 2007, exhibited a diminished presence in 2008,” according to the report.
Among food processors’ subcategories, four engaged in fewer deals in 2008 than in the previous year: dairy, multi-product, poultry and snack food segments.
Bakery activity was up significantly. One of the year’s biggest deals involved the sale of a George Weston Ltd. subsidiary’s U.S. fresh bread and baked goods business to Mexico-based Grupo Bimbo, one of the world's largest baking companies. The deal was made for gross and net cash proceeds of approximately $2.5 billion. The assets include the Arnold, Brownberry, Entenmann's, Freihofer, Stroehmann and Thomas' brand names. Flowers Foods also made two acquisitions, Butterkrust Bakery Inc. and Holsum Bakery Inc.
But the biggest deals of the year involved brewers. Global but Belgium-based InBev bought Anheuser-Busch Cos. For a whopping $52 billion. The combined company was renamed Anheuser-Busch InBev and is the world’s largest beer company, passing SABMiller.
In order to better challenge Anheuser-Busch InBev on American soil, SABMiller PLC and Molson Coors Brewing Co. – themselves both recently merged companies -- on June 30, 2008 created joint venture MillerCoors, combining America’s No. 2 and 3 brands.
For confectioners, 2008 was the second year of M&A growth, with two more deals completed than 2007’s five. The most noteworthy was Mars Inc.’s foray into the chewing gum category with the $23 billion buy of Wm. Wrigley Jr. Co. -- the second most expensive single deal listed in 2008. Wrigley will retained its Chicago headquarters and will operate as a separate business segment, alongside the existing Mars’ business units of chocolate, pet care, food, drinks and symbioscience.
Also of note in the category was the closing of the sale of Godiva Chocolatier Inc. by Campbell Soup Co. to Yildiz Holding A.S. of Israel. The deal, which was announced in 2007 but not completed until last year, was for $850 million.
Other notable deals:
- JBS S.A. bought Smithfield Beef Group.
- J.M. Smucker Co. bought the Folgers coffee business from Procter & Gamble.
- Ralcorp bought the Post cereals business from Kraft.
In the Dairy segment, mergers and acquisitions activity was more in line with 2006 and 2005 totals, totaling seven completed compared with 2007’s 11 mergers. Agropur made some noise in 2008, acquiring Trega Foods and Schroeder Milk, after remaining quiet in the U.S. market and making only one other deal since 2002. Cal Maine Foods, the largest producer and distributor of fresh shell eggs in the U.S., also made news by acquiring the majority of the assets of Zephyr Egg Company and increasing its stock with approximately two million laying hens in modern, in-line facilities.
The Fruits and Vegetable food producer segment posted similar results to its 2007 totals, with one more completed acquisition this year. The deals made in the category were mostly made between fruit and vegetable processors such as the Taylor Fresh Foods and Foxy Foods’ fresh produce processing operations and the Driscoll’s Strawberry Associates shareholdings increase in Driscoll’s of Chile. Other notable deals included the J.R. Simplot Company purchase of retail agricultural business H & R Ag. Inc. and the acquisition of Sunrise Growers-Frozsun Foods by an affiliate of Sun Capital Partners, Inc.