Food & Beverage Industry Report

The multi-hundred-billion dollar global food & beverage industry is positioned for ongoing growth and innovation. This growth will be driven by changing consumer preferences, technological advancements, more focus on sustainability, and the availability of health-conscious choices.

Industry Trends 

A slew of various trends drive the robust activity surrounding the food sector.

There is a growing consumer demand for foods that are organic and/or functional. Organic foods and clean-label foods are drawing a larger focus as consumers are demanding more transparency regarding what is in their food and how it is produced.

Plant-based alternative proteins and animal-free foods continue to disrupt the food & beverage space as more companies get in on the trend, causing the prices to drop. Consumers are becoming more interested in trying these products, especially as the cost of meat is up due to inflation. Data shows that more customers are willing to try these products for the first time. However, there are challenges to getting them to come back. Many people still find the flavor unappealing. These products are also highly processed, so the nutritional numbers are not as good as one might expect from a “vegetarian” type of product. Most plant-based products are still high in fat and sodium, as well as some mysterious-sounding ingredients. Food companies are now viewing the plant-based category as one of their own rather than as a replacement for actual meat products.      

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Technology is being adopted in more restaurants to improve customer satisfaction and drive sales. These innovations include automation for smoother operation and delivery, self-ordering touchscreen kiosks, and a variety of mobile apps for customized orders, quick payment, digital entertainment, and gaming. The industry will continue to benefit from the increasing digitalization of food services. Venture capital funding in food tech startups has been largely due to investments in e-commerce platforms. Online food companies continue to develop more convenient and healthy ways for shoppers to enjoy delivery services. Instead of dinner and a movie, consumers are opting for delivery and Netflix. Further, the rise of personalized nutrition, aided by artificial intelligence and data analytics, will allow companies to offer more tailored products.

There is also growing adoption of equipment, automation, and robotics. Technological innovations are being used in various areas, including farm fields, production lines, and restaurants. These technologies include smart warehousing, artificial intelligence, self-service counters, and tech that supports sustainability initiatives.

Millennials are driving demand for craft beer pairings, the infusion of alcohol into foods, and artisanal snack foods as a replacement for meal occasions.

Sustainability is on the menu as the war on plastic gains momentum and the demand for innovative eco-conscious packaging grows. 63% of consumers are less likely to buy products with packaging that is harmful to the environment. This means that a sustainable strategy is needed in the long term as younger generations will eventually become a more critical customer base. Packaging will see an increasing shift toward solutions that are recyclable, biodegradable, and made with less plastic.

Cannabis in the form of CBD oil is becoming increasingly popular in food and beverage formulations, including cocktails and coffee drinks.

In the beverage sector, there is growing popularity of non-alcoholic alternatives, functional and plant-based drinks, as well as low-sugar and no-sugar options.

New strains of probiotics are making it possible for shelf-stable probiotic foods to emerge as a popular healthy choice. 

Consumers are craving new flavors and ingredients, creating new opportunities for brand expansion. This includes global cuisines enjoyed at home, more complexity of spicy varietals, and the use of more fermented foods. Specifically, Pacific Rim flavors are an ongoing trend.

The direct-to-consumer channel is expected to continue to lead all other distribution channels. Data shows that around 70% of consumers recently purchased groceries online. Consumer goods companies can counter shipping costs with improved logistics systems and fewer coupons and slotting fees. It also cuts out layers of costs for consumers. 

M&A

There are promising M&A opportunities in the food & beverage industry for several reasons. Giant food companies are looking to expand their portfolios with food innovation. Food startups and smaller private food companies are looking to cash in on growth and exit strategies. Private-label companies continue to draw strong buyer interest and are expected to see more focus on consolidation as the market matures. Private equity and venture capital firms are motivated to take action. The outlook for M&A activity in the food & beverage industry remains positive, with major players seeking inorganic growth strategies to boost sales, lower interest rates, lower inflation, strong capital markets, and accelerate transaction timelines.

Our Recent Success Stories in the Sector

Some of Benchmark International’s more recent successful deals in the food & beverage space include:

• The sale of Skillets, Inc. to Rosser Capital Partners
• The transaction between Bone Daddy’s, Inc. and The Island Spot
• The acquisition of Musgrave Crafted Spirits by International Spirits Company
• The deal between Demetrius of Forty Churches, LLC, DBA Ahlers Meals, and a private investor
• The sale of Espresso Parts, LLC to Diversified Foodservice Supply, LLC
• The transaction between Sunny Morning Foods, Inc. and Burris Logistics
• The acquisition of Bagel King Wholesale Inc. by Austin Circle Partners
• The deal between Jimmy Kelly’s Restaurant Inc. and HTG Restaurant Group
• The sale of W.A. Imports Inc. to Forever Cheese Mitica
• The transaction between Cookie Do, Inc. and 16 Handles