2025 Food and Drink M&A Forecast
As we get ready to welcome 2025, let’s take a closer look at what might be in store for the food and drink industry in terms of mergers and acquisitions (M&A). Despite facing challenges like rising inflation and decreased investor confidence, the food and drink manufacturing sector remains one of the largest globally. In recent times, we have witnessed significant M&A deals, such as Mars acquiring Kellanova for £28bn, Carlsberg acquiring Britvic, and Supreme stepping in to rescue Typhoo Tea. These transactions highlight the industry’s resilience and adaptability.
James Scallan, managing director at investment bank Houlihan Lokey, believes that if inflation stabilizes and interest rates remain favorable, we could see a surge in M&A activity in 2025. Private equity firms, in particular, are poised to make a comeback, with lower interest rates making leveraged buyouts more attractive. Categories like snacking and frozen foods are expected to attract investor interest due to strong consumer demand for convenient and value-driven products.
Additionally, the trend towards sustainable and ethical sourcing is likely to drive more deals as consumers seek transparency and environmentally responsible brands. Large corporations are also focusing on streamlining their portfolios to enhance operational efficiency and unlock growth opportunities. This consolidation trend is expected to continue shaping the market in the coming year.
Looking at the drinks segment, Javier Chiquero, vice president at Houlihan Lokey, highlights a notable level of activity in 2024. Functional beverages, like Vitamin Well, have been attracting private equity interest, showcasing the growing demand for healthier alternatives. Sustainability and innovation are set to play crucial roles in the industry, with a focus on ethical sourcing and recyclable packaging.
Financial sponsors are increasingly showing interest in investing in the food and drink sector, signaling a positive outlook for future M&A activity. For businesses and investors alike, staying agile, capitalizing on synergies, and anticipating shifts in consumer behavior will be key to remaining competitive and driving growth in this dynamic market landscape. With the right strategies in place, both established players and new businesses can find success in the evolving food and drink M&A landscape.
