Food Industry Mergers Activity Remained Steady in 2013

Aug. 18, 2014
The Food Institute recorded 311 mergers in the food industry in 2013; a total that is roughly the same as 2012.

The Food Institute, during 2013, recorded 311 mergers in what it defines as the broader food industry, bringing the total to roughly the same number as 2012 (287 deals closed plus 29 lingering). While also about even with 2010, those numbers are down from the 381 recorded in 2011, during the depths of the Great Recession when buying companies could be done on the cheap.

Looking at just the two categories that form Food Processing's narrower definition of the food and beverage industry shows a higher level of activity. Among food processors, there were 96 deals closed in 2013 and nine more that were announced but did not close, up from 76 and seven in 2013. And "soft drink/water/juice bottlers and manufacturers" added another nine closings.

The Food Institute, a nonprofit organization founded to collect and disseminate information about the industry, includes in its definition of the food industry a number of other entities as well as brokers, consultants and other service providers, investments firms and banks, packaging and equipment suppliers, raw product and ingredient suppliers, restaurants and foodservice, retailers, and wholesalers and distributors.

Within the true food processors group, dairy, meat and “other” processors saw the most activity. Although it's a Canada-based, mostly dairy firm, Saputo Group now has more sales in the U.S. than in its homeland, thanks in part to the 2013 acquisition of Morningstar Foods. The former division of Dean Foods, which made Friendship cottage cheese and various private-label dairy products like coffee creamers and ice cream mix, brought $1.6 billion in sales to its new owner.

Agropur Cooperative purchased Coast Mountain Dairy, an ice cream producer. Farmer cooperative Dairy Farmers of America acquired Dairy Maid, family-owned processor of milk, juice and fruit drinks. French foods group Danone bought YoCrunch. Lifeway Foods Inc. acquired Golden Guernsey Dairy for $7.4 million; the 170,000-sq. ft. plant will provide additional manufacturing capacity for Lifeway’s growing kefir-based business. The Golden Guernsey plant was shuttered in January following a bankruptcy filing.

Once detached from Dean Foods, WhiteWave Foods Co. acquired Earthbound Farm from its existing shareholders, led by Kainos Capital and founders Drew and Myra Goodman, for approximately $600 million in cash. Earthbound Farm produces and markets an extensive line of organic fresh fruits and vegetables, frozen fruits and vegetables, and dried fruits and snacks.

An interesting international note: Vietnam Dairy Products JSC, known as Vinamilk, received a license from its Ministry of Planning and Investment to purchase a 70 percent stake in California-based Driftwood Dairy Holding Corp. for $30.5 million.

Meat processors also were active in 2013, with mergers and acquisitions rising 300 percent from 2012. The marquee news from that category was the $7.1 billion acquisition of Smithfield Foods Inc. by China's Shuanghui International Holdings Ltd., which closed in September. See Shuanghui Completes Smithfield Acquisition

Even before it began its 2014 pursuit of Hillshire Brands, Tyson Foods Inc. acquired Circle Foods LLC, a producer of frozen and refrigerated handheld Mexican foods, uncooked tortillas and Indian flatbreads. Hillshire, stretching into new niches, bought Golden Island, a producer of more than 20 varieties of gourmet jerky products. See Tyson Buys Mexican Food-Maker Circle Foods

Investment firms and banks occupied 15 percent of all mergers in 2013 with a total of 47. Headliner in that category was the purchase of H.J. Heinz Co. by Berkshire Hathaway and 3G Capital in a blockbuster deal valued at $28 billion. See H.J. Heinz Company to be Acquired by Berkshire Hathaway and 3G Capital

Brynwood Partners acquired the Lightlife brand from ConAgra Foods Inc. Lightlife’s products include vegetarian-based burgers, hotdogs and other meatless frozen and refrigerated items. The transaction includes the Lightlife manufacturing operations in Turners Falls, Mass.

Another notable acquisition in this category was Apollo Global Management LLC and Metropoulos & Co.’s acquisition of certain assets of Hostess Brands Inc.’s baked snack foods business for $410 million. They bought the Twinkies, Mini Muffins, Cup Cakes, Ho Hos, Zingers and Suzy Q’s brands plus five bakeries in the U.S. This new firm appears on our Top 100 chart as Hostess Brands. See The New Hostess Company Resumes Operations

Other pieces of Hostess were dispersed due to its bankruptcy filing. Flower Foods got bread brands Wonder, Merita, Home Pride, Butternut and Nature's Pride, plus 20 bakeries. McKee Foods Corp. snagged the Drake's snack cake business.

In the candy and confections group, Atkinson Candy Co. acquired the Slo Poke, Black Cow and Sophie Mae brands from Laco Inc. Pearson Candy Co., a portfolio company of Brynwood Partners, acquired the Bit-O-Honey brand from Nestle USA Inc. This is the fifth brand Brynwood Partners has acquired from Nestle.

On the international front, Hershey Co. (technically Hershey Netherlands BV) bought Shanghai Golden Monkey, a privately held Chinese firm.

In the fruit and vegetable category, Dole Food Co. Inc. was taken private by its Chairman and CEO David Murdock, who also had been Dole's largest shareholder with a stake of about 40 percent. Paramount Citrus acquired the Cuties trademark by Sun Pacific as part of a move to oversee all facets of the production, sale and marketing for most of the country's California mandarin crop. Paramount Citrus will partner with Fowler Packing to grow, process, market and sell more than 60 percent of the country's California mandarin crop. See Murdock Offers to Take Dole Private, Again

Mergers and acquisitions among multi-product processors increased by 34 percent in 2013. Post Holdings, formerly just a cereal company, now qualifies for this broader category. Post acquired five companies: Golden Boy Foods, Dymatize Enterprises, Agricore United Holdings Inc., Hearthside Food Solutions’ private label cereal, granola and snacks business, and Premier Nutrition Corp. Late the previous year, Post bought Dakota Growers Pasta Co. from Viterra Inc.
B&G Foods Inc. was also active in 2013, acquiring three companies: Robert’s American Gourmet Food (with its Pirate's Booty brand), Rickland Orchards LLC and the TrueNorth brand of nut clusters from DeMet's Candy Co.

See Post Holdings' acqusitions in 2013 and 2014:

Private label leader Treehouse Foods Inc. completed the acquisition of Associated Brands, a private label manufacturer of powdered drinks, specialty teas and sweeteners, from Torquest Partners and other shareholders, for $180 million. TreeHouse also acquired Cains Foods LP for $35 million in cash. Cains Foods is a manufacturer of shelf stable mayonnaise, dressings and sauces, with approximately $80 million in annual revenue. See TreeHouse Foods To Acquire Associated Brands and TreeHouse Foods To Acquire Protenergy Natural Foods

Hormel Foods Corporation acquired the Skippy peanut butter business from Unilever United States Inc. for about $700 million. The transaction includes Skippy manufacturing facilities in Little Rock, Ark., and Weifang, China. The Skippy peanut butter domestic line consists of 11 varieties of shelf-stable peanut butter products. Skippy, the No. 2 peanut butter brand in the U.S., has annual sales of roughly $370 million, with $100 million of that coming from outside the U.S. It is the leading peanut butter brand in China.

Unilever also sold its Wish-Bone and Western salad dressings brands to Pinnacle Foods Inc. for approximately $580 million. See Unilever to Sell Wish-Bone to Pinnacle Foods

Bellisio Foods Inc., a portfolio company of Centre Partners Management LLC, completed its acquisition of Overhill Farms Inc., another frozen food maker, for approximately $81 million. Bellisio Foods is the country’s third-largest producer of frozen entrees, which are sold under the Michelina’s, Boston Market and other brands as well as under private label.

Del Monte Foods acquired Natural Balance Pet Foods Inc., a maker of super-premium pet food for dogs and cats. Shortly thereafter, Del Monte sold off legacy foods business to longtime licensee Del Monte Pacific Ltd. With only pet foods left, U.S.-based Del Monte renamed itself Big Heart Pet Brands. See Del Monte Foods Becomes Big Heart Pet Brands

Seneca Foods Corp. bought substantially all the operating assets of fellow vegetable canner Allens Inc. for approximately $148 million. This followed Allens' filing a petition for relief in bankruptcy court in October 2013.

With the Food Institute's broader definition in mind, one of the largest buys – which will have repercussions for many food and beverage processors -- was announced in the fourth quarter but has not yet closed. Sysco Corp.’s acquisition of US Foods will result in a foodservice distribution giant with some $65 billion in sales annually and an estimated 25 percent of the $235 billion wholesale foodservice market. This merger could mean a big change in the foodservice industry, but the large company will not wipe out the need for smaller distributors, according to food industry experts.

Another tangential but big purchase was in the retail category: Kroger’s purchase of Harris Teeter Supermarkets, and the fourth largest supermarket acquisition of the past 10 years. The deal added 212 supermarkets to Kroger’s 2,418 locations. Other notable deals Spartan Stores Inc.’s acquisition of Nash Finch Company making Spartan the largest food supplier to U.S. military stores, and Bi-Lo Holdings’ acquisition of 165 Sweetbay, Harveys and Reid's supermarket chains, as well as 22 Piggly Wiggly stores.

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