Food & beverage trends: M&A activity points towards major shifts in consumer behaviour

On the face of it, the 57% volume increase in M&A (mergers and acquisitions) in the UK food and beverage industry in 2023 points towards a thriving trade, with companies competing for dominance by expanding their portfolio and consumer reach. However, taking a closer look, it’s clear that some areas of the industry are doing better than others, with larger companies capitalising on smaller companies’ inability to absorb increased production costs. In addition to this, the value of these contracts has been decreasing, with only 8% of transactions above £50m (€58.2m), falling well below the five-year historic average of 15%.

Across the industry, 75% of deals completed in 2023 had an estimated value of £10m or less, this is up from 69% of deals in 2022. Both 2022 and 2023 experienced a high volume of low-value deals compared to the five-year average between 2017-2021 (57%).

What’s hot and what’s not?

Beverages was the most active category in 2023, accounting for 28.4% of all M&A. It is also the clearest example of the shift we are seeing in the market as 80% of all deals had an estimated value below £10m.

A large number of these low-value transactions were for small beer producers. Furthermore, 25% of all beverage company acquisitions were beer producers being acquired out of administration. This follows in what is believed to be an oversaturated market in addition to an intense period of cost inflation.

Mark Lynch, partner at Oghma Partners, which provides advice on acquisitions, divestments and strategy to the European and UK food, beverage and packaging industry, said: “The key issues that impacted M&A in 2022 dragged over into the start of 2023 with inflationary cost pressures, the cost of living crisis and the increased cost of debt suppressing the higher value deals in the first half of the year (with the exception of the Glanbia Cheese acquisition).”