Black Country JV helps reshape food and beverage trends
AN innovative joint venture pioneered by Black Country-based cash and carry group, AF Blakemore has been identified as an important example of how innovative new concepts are helping to re-shape the food and beverage sector.
The Willenhall wholesaler, which is a leading SPAR retailer, has entered a JV with EAT 17, which has been successful in operating SPAR convenience store concepts with in-house restaurants.
Maria O’Donnell, associate director in Grant Thornton’s Birmingham advisory team, said: “This investment demonstrates portfolio optimisation through innovative partnerships and exploring new routes to market.”
The AF Blakemore example is included in a new study completed by the business adviser and accountants into the on-going consolidation in the food and beverage (F&B) market as businesses merge to insulate themselves from an increasingly tougher climate.
The review of the F&B sector’s M&A deals completed in Q1 2015 shows that activity began the year strongly, with a total of 37 transactions involving UK and Irish targets and/or acquirers. This is a similar level of activity to that recorded in the four previous quarters (where there was an average of 41 transactions per three-month period).
Trefor Griffith, partner and head of food and beverage at Grant Thornton, said: “Brands are under pressure. Producers are responding by taking a hard look at their businesses, both for the potential to become more efficient, but also to look at new routes to market and whether they have the right mix in their portfolios to be competitive in today’s harsh environment.
“Portfolio optimisation continues to be one of the key investment themes driving M&A activity. For example Nestlé, which has already divested its Spanish La Cocinera frozen meals business to Findus, is seemingly also nearing the sale of frozen food unit Davigel to Brakes. Other groups undertaking portfolio optimisation include Unilever, Kerry Foods, and 3G Capital with Heinz, and no doubt the newly formed Kraft/ Heinz group.”
Transaction volumes in food-to-go, deli specialities and snacks were seen to have undergone a significant upturn last year and the trend has continued in Q1 with 13.5% of overall transactions in the deli/ convenience sector. The sale of food-to-go manufacturer Adelie to private equity firm HIG Capital Europe is held up as an example of this trend.
A further trend sees overseas firms, particularly from Asia, continuing to demonstrate their interest in Western targets. Bright Foods’ acquisition of the remaining 40% in Weetabix cemented its entry into both the UK and global food markets through the Weetabix brand. Also during Q1, Israel’s Frutarom acquired Leicestershire-headquartered flavours company Foodblenders, and other Asian groups continue to voice their interest in pursuing western targets.
Grant Thornton said the level of private equity activity was relatively stable in the first quarter of this year with six transactions compared to seven in each of the preceding three quarters, although this was well below the Q1 2014 peak of 13 deals.
