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Mixed bag for food deals in 1H24

May 28, 2024
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Illustration: Sarah Grillo/Axios

It's a mixed bag for sellers of CPG food brands currently in market.

Why it matters: Buyers and sellers are still trying to settle on a valuation sweet spot after interest rates plateaued this year.

Zoom in: Many of the larger deals reportedly on the market, such as General Mills' Yoplait and Kraft Heinz's Oscar Mayer, will largely appeal to PE funds that specialize in turnarounds, sources say.

  • The same sources say General Mills and Kraft Heinz are also expected to bring Progresso and Maxwell House, respectively, back to market.
  • A Kraft Heinz representative characterized reports as media speculation while declining to comment.

Zoom out: There's valuation alignment between buyers and sellers for profitable companies growing more than 30% annually, along with stable assets like food manufacturers.

Reality check: Several assets on the block now are lower growth, larger and more challenged, with a small pool of potential bidders given their large price tags, a buy-side source says.

  • "Some of them will get done, but not most," the source adds.

Case in point: Nestlé and PAI Partners were considering a dual-track process for their ice cream joint venture Froneri, but PAI is now weighing a continuation fund, amid competing ice cream auctions.

Winners: Supplement makers have been attractive targets, with Simply Good Foods' $280 million purchase of OWYN and Nestlé aiming to buy the remaining stake it doesn't yet own in Orgain from Butterfly this year.

Caveat: Mary Ruth Organics, a maker of organic children's supplements owned by Butterfly, was being marketed by Houlihan Lokey, but negotiations broke down over valuation expectations, sources say.

Losers: Jerky brands haven't found a lot of success finding new owners because they are reliant on co-packers and lack a defensive moat, sources say.

  • That includes Tillamook Country Smoker, on the block through Houlihan Lokey, and Monogram Capital-backed Country Archer, which was working with Centerview with about $125 million in sales, sources say.
  • Country Archer turned down two offers because they didn't factor in the jerky maker's future growth, a source says.

What's next: Sources point to Chomps, which is nearly the size of Tillamook and is contributing most of the growth to the category, as being more appealing to acquirers.

State of play: Butterfly Equity-backed avocado oil maker Chosen Foods is on the block via Morgan Stanley, with EBITDA of around $65 million, sources confirm. Butterfly declined to comment.

  • Olympus Partners-backed Rise Baking Co is exploring a sale and is also working with Morgan Stanley, they confirm.
  • Fitcrunch-parent Pervine Foods, a portfolio company of Union Capital Associates, is working with investment bank Piper Sandler and has between $60 million and $70 million of EBITDA, sources confirm.
  • Revolution Foods, which makes meals for school children, is being marketed by investment bank Kroll, Axios previously reported.

The bottom line: Dealmakers hope for a clearer picture of macro trends and politics in early 2025 — and having a full year of audited results to study won't hurt.

General Mills, Chosen Foods, Tillamook, Insignia Capital, Mary Ruth Organics, Fitcrunch, Union Capital Associates, Rise Baking, and Olympus Partners did not respond to requests for comment.

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