Top Food and Beverage Companies for 2009: Licking the Recession

For Meat processors, 2008 was a blockbuster year compared with 2007. After only two completed acquisitions in 2007, the category saw 10 completed in 2008. Cargill Value Added Meats made two acquisitions, acquiring the assets of Willow Brook Foods and its brands as well as the purchase of Carneco Foods LLC from Lopez Foods, Inc. and Tyson Foods/IBP. Tyson Foods sold its Jordan’s, Deutschmacher, Kirschner, Essem, Tasty Bite and Willams of Vermont brands to privately owned and operated Kayem Foods Inc. of New England. JBS S.A. was involved in two very large deals with very different outcomes, first acquiring Smithfield Beef Group Inc. from Smithfield Foods Inc. The proposed acquisition of National Beef Packing Co. by JBS S.A. fell apart, however, after the company encountered fierce opposition by the U.S. Justice Department, which filed a lawsuit in federal court along with 13 states seeking an order against the deal. The lawsuit claimed the acquisition would create the largest U.S. beef packer, responsible for the slaughter of 35% of U.S. cattle. The JBS S.A. deals follow the 2007 acquisition of Swift & Company by J&F Participacoes S.A. which created the world’s largest beef processor.

Reporting the most mergers and acquisitions in the Food Processor category in 2008, Multi-Product processors registered a total of 30 completed deals, two less than the previous year and the second consecutive year the number decreased. The company with the largest presence among multi-product processors involved in M&A activity was The J.M. Smucker Co., which made three deals in 2008 after making two in 2007. In the Canadian market, Smucker entered into an agreement, through a subsidiary, to acquire Europe’s Best Inc., a Montreal-based privately owned frozen fruit and vegetable marketer. Smucker also acquired the Knott’s Berry Farm food brand from ConAgra Foods, Inc., and most significantly merged Procter & Gamble’s Folgers coffee business into The J.M. Smucker Company, its 10th No.1 brand in North America.

However, it was The Kellogg Company that was most active among multi-product processors, making four deals over the course of 2008. Expanding its presence in China, Kellogg acquired substantially all of the assets of Zhenghang Food Company Ltd. (Navigable Foods). Kellogg also made another international deal with the acquisition of Australia-based Specialty Cereals PTY Limited. In the U.S., Kellogg acquired Indybake Products LLC and Brownie Products Co. as well as the trademarks and recipes of Mother's Cake & Cookie Co. after Archway/Mother’s declared bankruptcy.

The Seafood Processor category posted three more acquisitions in 2008 than in 2007, but also three less than in 2006. All deals in 2008 were among seafood processors. The most significant deal of 2008 was the sale of Del Monte Corp.’s seafood business, which includes Starkist, for aproximately $359 million to the Dongwon Group, which produces about 75% of South Korea’s canned tuna. Also noteworthy was Trident Seafoods Corp.’s acquisition of Bear & Wolf Seafood Co. and its processing facility in Cordova, AK. Trident is a vertically integrated harvester, processor and marketer of seafood from Alaska, the Pacific Northwest and around the world.

While there was one less deal completed in the Snack Food processor category through 2008, the total was still significantly more than the totals reported in 2004 through 2006. PepsiCo closed an incomplete deal from 2007 by acquiring Brazilian snack company Comercio de Doces Lucky Ltda, and further expanded itself internationally by purchasing Penelopa, a Bulgaria-based producer and seller of branded nuts and seeds with a plant in Sliven. PepsiCo made three deals with global scope, including acquiring Spitz International Inc. of Canada. One notable trend in the snack food category was the acquisition of companies that manufacture healthy snacks such as granola, seeds and nuts. As more health conscious consumers look to purchase less processed and more natural snacks, larger food processors are looking at acquisitions to reach that market without making changes to their operations.

Finally, in the “Other Processors” category, an increase of 11 mergers and acquisitions was observed over 2007’s totals, and none was left unclosed. The Monsanto Co. sold its Posilac bovine somatotropin brand and related business to Eli Lilly and Co., while McCormick & Co. purchased the assets of Lawry's from Conopco Inc., an indirect subsidiary of Unilever N.V. Nutracea made two acquisitions in 2008, purchasing Irgovel, the largest rice bran oil processing facility in South America, and a production facility in Phoenix, AZ. Also notable was the purchase of Archer Daniels Midland Co.’s malting division by Malteurop, the world’s third largest malting company.  

A couple notes about how we arrive at these figures:

For all the foreign-based companies, we convert foreign currencies to U.S. dollars as of Dec. 31, unless otherwise directed by the company. Currency fluctuations can distort these companies’ real performance in their home currencies. The Canadian dollar was an extreme example. It actually was worth more than a U.S. dollar ($1.02) on Dec. 31, 2007; it was back to 82 cents at the end of 2008, which may make the 2008 figures of many Canadian companies seem low. One euro was worth $1.47 on Dec. 31, 2007; it got you $1.41 at the end of 2008.

And we attempt to count only value-added, consumer-ready products processed in U.S. and Canadian facilities. So all grocery store/packaged foods are included and even beef patties sold to McDonald’s … but not raw meat or even ground beef sold to another food processor, nor ingredients. Exports are OK, but not products manufactured overseas.