Bite-sized opportunities
AdobeStock File #: 959192379
As consumer preferences shift towards health-conscious, sustainable options and corporate buyers become more active, an immense opportunity exists for strategic growth in the snacking industry.
James Scallan’s outlook on the snacking sector’s M&A landscape sees a sector poised for continued expansion, driven by premium acquisitions and innovations that meet evolving consumer demands. The managing director in Houlihan Lokey’s Consumer Group observes
the significant presence of corporate buyers in the M&A activity within the wider food and beverage sector, but also for the snacking market.
As Scallan notes, corporations are “strategically seeking deals that enable geographic expansion or diversification of product lines”, particularly in rapidly growing segments – which snacking is certainly one.
Snacking has emerged as a vibrant and rapidly evolving segment and is one being reshaped by shifting consumer preferences, health and wellness trends, and technological advancements, making it essential for those outside industry to keep a finger on the pulse of the changes.
The shift towards healthier eating has bolstered interest in ‘better-for-you’ and ‘healthy indulgence’ snacks, creating opportunities for innovation.
Scallan recognises that by acquiring businesses that align with trends like healthier eating and sustainable sourcing, the buyers aim to reinforce their market positions while capitalising on evolving consumer preferences.
“Additionally, the increased frequency of snacking occasions, driven by busier lifestyles and an expanding variety of snack formats, has sustained consumer demand,” he highlights. “Strategic buyers, including private equity firms, are particularly drawn to premium assets within the sector. This appetite is reflected in the rise of ‘mega deals’ in 2024, such as Mars’ acquisition of Kellanova, the largest in snacking history.”
The next few years will be interesting to watch as the factors influencing shifts in consumption patterns will have an impact on acquisitive behaviour as economic conditions improve.
Scallan sees with interest rates continuing to normalise and visibility of performance increases (including volume recovery and inflation pass-through), an uptick in M&A activity is expected as we approach 2025.
He believes activity is likely to intensify as private equity grows more competitive with improved debt availability and pricing. Additionally, improving consumer confidence as a result of easing cost-of-living pressures should lead to an improved trading environment.
Consumer demand for health-conscious snacks will continue to drive growth in “better-for-you” options that prioritise natural ingredients and address dietary needs like gluten-free, plant-based, and low-sugar options. Additionally, a growing emphasis on sustainability is driving innovations in eco-friendly packaging, with many companies responding to consumer preferences for environmentally responsible products.”
There are various factors to take into account when analysing snacking behaviours, which include social and digital media. By analysing social media interactions and feedback, brands can gain valuable insights into emerging trends and consumer sentiments. This will only feed into the importance of snack food products becoming an increasingly integral part of consumers’ daily routine. People turn to snacks for a range of reasons from a treat to satisfying a craving, cheering themselves up or just relaxing. Companies capitalising on consumer impulses, is making it even more tempting for acquisitive companies looking at key product categories and geographies where there is potential for growth and improvement.
- Rodney Jack, editor, Food & Drink Technology.
Keep in touch via email: [email protected] Twitter: @foodanddrinktec or LinkedIn: Food & Drink Technology magazine.
