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BFD Expert Voices - Retail Deals

BFD Expert Voices

Data: Refinitiv; Chart: Jared Whalen/Axios

The total value of announced deals in the consumer staples sector, which includes Mondelez's $2.9 billion acquisition of Clif Bar, is down by nearly half compared to last year, according to Refinitiv data, Richard writes.

The number of transactions is also down, with 190 so far this year compared to 270 at this point last year.

Why it matters: Consumer staples companies are typically seen as a haven for investors during periods of stock market volatility and recessions — as people always need to eat and wash.

We've yet to see an M&A bump materialize this year — in contrast to the flurry of deal activity in the retail space. Buyers and sellers are in price discovery mode and facing headwinds such as labor and inventory shortages.

Yes, but: According to a food and beverage M&A report from Kroll, public companies and PE firms (among others) are sitting on large piles of cash, which will likely drive M&A transactions.

"Given some of the macro headwinds and fears of a recession currently permeating the market, we believe the food and beverage industry will remain an attractive, defensive sector for investment and acquisitions," the firm said.

What's next: Potential deals in the food space could help lift those numbers. 

Kellogg said it could sell its plant-based food business, which is anchored by the Morningstar Farms brand that helped establish the category almost five decades ago and has $340 million in sales. (Kellogg announced last week it’s splitting itself into three separate publicly traded divisions.)

TreeHouse Foods is in talks to sell its meal prep business to PE firm Investindustrial for $1.3 billion (more on that below).

What we're watching: Look for other CPG and food conglomerates such as Unilever, which recently named activist investor Nelson Peltz to its board, to evaluate their portfolios.

Peltz has a history of breaking up companies, including pushing Kraft to spin off its snacks division (which we know today as Mondelez) in 2012 with the backing of fellow investor Warren Buffett, as one of many examples.

1 big thing: Consumer staples M&A is down by half

TreeHouse Foods may shed its meal-prep unit in an effort to center its business on its flourishing snack and beverage unit, per Bloomberg.

Why it’s the BFD: This follows similar moves by other food and beverage players that have divested parts of their businesses to better focus operations on higher-growth areas, Kimberly writes.

Snacks have become a more popular part of the pantry due to shifting consumer tastes that favor bites on the go, serve as replacement meals, or reinforce healthier eating habits.

Driving the news: The private-label grocer is in exclusive talks with Italian private equity firm Investindustrial to sell its meal-prep business for about $1.3 billion, including debt, Bloomberg reports.

Context: Kellogg is planning to spin off its North American cereal and plant-based foods units while keeping its global snacking business intact.

Last year Kraft Heinz completed the sale of part of its cheese business to France’s Lactalis in a bid to simplify its business.

PepsiCo said in August that funds from the sale of its Tropicana and other juice brands in North America to a French PE firm would go toward developing and expanding its health-focused snacks and zero-calorie beverages portfolio.

Flashback: TreeHouse reached a settlement with Jana Partners in April that gave the activist investor a board seat. 

Jana had for more than a year pressured the company to consider several strategic options, including selling itself entirely.

TreeHouse planted the seed last year that it was exploring the sale of a portion of its meal-prep business after launching a strategic review. (It opted not to sell itself completely earlier this year.)

TreeHouse and Investindustrial representatives couldn’t immediately be reached for comment.

2. The BFD: TreeHouse preps meal-prep sale

Illustration of forks, knives, plates, money and abstract shapes.

• Zomato, a listed Indian food delivery firm, completed its purchase of  Indian instant grocery delivery startup Blinkit, for $568m in stock. Blinkit had raised over $700m from firms like Zomato, SoftBank and Tiger Global. When the deal was announced earlier this year, the value was closer to $750m. http://axios.link/CBee

• Pine Labs, an Indian e-commerce and payments startup, acquired Indian embedded finance startup Setu for around $75m in cash and stock, per The Economic Times. Pine Labs backers include Vitruvian Partners, BlackRock, Baron Funds, Madison India Capital, Ward Ferry Management and Invesco. Setu had raised a $15m Series A round co-led by Lightspeed India Partners and Falcon Edge Capital. http://axios.link/tqkr 

• A Foot Locker subsidiary agreed to sell its team sales business to BSN Sports, a large direct marketer and distributor of sporting goods, footwear, apparel and branding. http://axios.link/3Dqa 

• HappyVore, a French plant-based meats company, raised €35m. Invus led, and was joined by Artal, Adrien de Schompré, BPI France and Philippe Cantet. http://axios.link/huK3

• Populix, an Indonesian consumer insights platform, raised $7.7m in Series A funding. Intudo Ventures and Acrew Capital co-led, and were joined by Altos Ventures and Quest Ventures. www.populix.co

• Magical Mushroom Co., a London-based sustainable packaging startup, raised £3m led by Ecovative Design. www.magicalmushroom.com

3. Retail transactions

• McDonald’s CFO Kevin Ozan was promoted to senior executive vice president of strategic initiatives and president Ian Borden will succeed him as CFO, effective Sept. 1. Global supply chain chief Francesca DeBiase plans to step down from her post and retire, effective Aug. 31. http://axios.link/a5VU 

• Ralph Lauren named Deb Cupp, the president of Microsoft North America, to its board. Judith McHale, who has been on the company’s board since 2001, will not stand for re-election after her term, which ends in August. http://axios.link/BEAE 

4. It's Personnel

🗓 Situational awareness: Join us tomorrow at 12:45pm ET for conversations with Eva Press, a vice president within Meta's global business group who will discuss the social media giant's retail plans, and Jonathan Duskin, CEO of activist hedge fund Macellum, who will dish on the 2022 proxy season. Register.

June 27, 2022

1 big thing: Consumer staples M&A is down by half