How Consumer Spending Trends are Transforming Food M&A
In an uncertain economic landscape, consumer spending tends to lean more conservatively. In the latter half of 2024, consumer optimism has slowly increased but consumers still remain wary in their spending habits. That means they tend to be price-sensitive and 76% of consumers engage in trade-down transactions, where they exchange either the type or quantity of their purchases for better pricing.
Yet despite this cautiousness, consumers still planned to spend on food, with 40% intending to splurge on restaurants and dining out, and 39% intending to splurge on groceries. With these spending habits and tentative consumer optimism, how does this transform the food M&A industry? Here, we’ll dive into what these trends mean for food M&A transactions.
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The Future of Food M&A Transactions
Health is Wealth
Health and wellness is a large priority for consumers these days. According to recent research, nearly 70% of survey respondents recognized that healthy eating habits were an important factor in improving a person’s chance for a long life. Consumers care about healthy food and are aiming to spend their money in a way that reflects this focus. Ingredient labels are being scrutinized more than ever and consumers favor macronutrients, as well as vitamins.
Energy-boosting foods, as well as plant-based foods, are becoming increasingly popular. One such example of how this consumer focus is affecting food M&A transactions is PepsiCo’s push into the better-for-you foods category with the acquisition of Siete Foods. Some of the products made by Siete Foods are gluten-free, or made without dairy or soy. As consumers continue to eye healthier food options, more food M&A transactions will involve this push as well.
A Greener Focus
Sustainability is an increasing concern for today’s consumers. According to a survey from McKinsey, 66% of all respondents admitted that they consider sustainability when making a purchase. Even more striking is that 75% of all millennial respondents said that sustainability was a key consideration for their purchasing decisions.
This focus on sustainability refers to many aspects when it comes to food, including the way the products are made and packaged. Food M&A transactions are increasingly focused on sustainability, and investors are more willing to conduct deals with companies that have a positive ESG focus.
Private Labels Rule Out
Consumers also favor private-label foods instead of more branded names. These are typically offered at more discounted prices compared to branded counterparts, and consumers are taking notice. Nearly 70% of consumers buy private-label products due to their affordability. M&A transactions will continue to involve private-label food companies. For example, recently Cheeze Kurls LLC, dba CK Snacks, purchased Axium Foods Inc., which makes private-label snack foods. This transaction highlights the desire for companies to expand their private-label focus, which is a M&A trend that will only continue to increase.
MelCap Partners Will Enhance the Value of Your Food M&A Transaction
At MelCap Partners, we are well-versed in the food and beverage industry. For over 25 years, we have aided in several successful food M&A transactions and our experience as middle-market beverage and food M&A experts makes us the perfect choice for your next deal.
