Definition
Valuation Issues
Opportunities
- Growth of Australian export markets through growth of disposable income across parts of Asia.
- Increasing possibility of multi-national acquisitions.
- The impact of free trade agreements supporting sector revenue growth.
- Productivity improvements to boost farm production.
- Consolidation of smaller food producers.
- Ability to capitalise based on innovations in health or organic foods
Challenges
- Need for government approvals on larger foreign acquisitions
- Cheaper inputs from low cost manufacturing countries threatening manufacturers and food processors.
- Slow overall volume growth in the domestic market
- Climate challenges, in particular how will an El Nino affect production
Growth Trends
The $5 trillion global food and beverage industry will need to cope with major structural changes. By 2050 caloric demand will increase by 70% and crop demand by 100%. This has to occur within major constraints of limited fresh water and degraded arable land.
The average five year forecast to 2021-22 for growth across the 58 food & beverages sub-sectors in Australia is 1.67% p.a. This growth rate averages out a high level of variance in the individual sub-sectors.
2016 Transactions
There has been a significant shift in the mid-market food production areas with several transactions occurring both among primary producers and packaged food products. Mid-market M&A deal value for this sector is at AU$1,146.9M
Acquirers included cattle farmers (Paraway Pastoral, Agrify and Hancock Prospecting), Dairy (AAG, Blue River & Australian Dairy Farms Group), poultry (TasFoods, Sentinel) and seafood processors (Sea Harvest & Legend).
In packaged food, interesting transactions covered chocolate (Simon Crowe acquiring Koko Black), fresh wasabi (Tasfoods) and sauces (Simplot), while there was constrained activity in beverages such as craft beer (Dixon Hospitality) and wine with Casella Wine’s acquisition of Howcroft Estate and Dunvar Vineyard.