Why the capital crunch might be a 'new norm' in 2024 for food, beverage companies

“[Deals] are still moving, but they’re moving at a pace that we saw during the pandemic. It’s just very, very slow, so that’s further impacting companies in their cash flow cycle. I think this is, unfortunately, a new norm, and it’s likely going to continue through the year’s end and into next year. So, companies really must think about all their options.”

Moving the ‘light switch’ from growth to profitability 

As interest rates rise and consumers pull back on spending, CPG companies are struggling to raise enough money to keep their business open, and bankers and investors are more cautious about lending, she said.   

“The food and beverage industry particularly has faced a big capital crunch this year, and it doesn’t seem like it’s going to improve very quickly,” Palmer said. “It’s been a difficult year for a few reasons, including … the impact of inflation and [reduced] consumer spending, and margins are reduced… Many businesses are also missing their top lines, and companies need financing, but the banks are tightening their lending standards. Equity is very hard to come by, and debt is expensive … due to the rising interest rates.” 

In response, CPG companies have shifted away from placing greater importance on growth to now prioritizing profitability, she said. 

“For the longest period of time, it was all about top-line growth, and I don’t want to say growth at all costs, but that was certainly the priority. Then this light switch went off, and then all of a sudden, it was path to profitability,” she added.