Two thirds of global food suppliers and retailers are eyeing acquisitions next year as confidence gradually returns to the sector.
EY’s Consumer Products and Retail Capital Confidence Barometer found 67% of global food respondents expect to pursue acquisitions over the next 12 months, with 42% already having three deals or more in the pipeline.
The determination to seek M&A next year reflects improved confidence in the market, with 68% of food respondents to EY’s annual survey positive about short-term marketing stability compared with 59% a year ago.
Other signs of improved confidence are that 70% now expect a general improvement in M&A next year, compared with 60% last year, while 57% expect to hire talent compared with just 25% in April this year.
Blaise Girard, EY’s global head of consumer products & retail transaction advisory services, commented: “Consumer products and retail companies considering a full range of options that seek to balance the need to improve share price performance with opportunities to drive long-term business growth, and becoming bolder in their M&A outlook to achieve this.”
The main focus of M&A strategy remains outside domestic markets. As well as the AB InBev/SABMiller and Heinz/Kraft megadeals this year, some 52% of food respondents are targeting international deals, particularly focusing on Canada, the US, UK, Chile and Brazil.
However, there are still signs that the food industry is slightly more cautious that the rest of the global consumer goods and retail sector.
For example, 81% of general respondents expected a better M&A market and 60% had three or more deals in the pipeline.
The general consumer good and retailers are also targeting bigger deals, with 4% aiming to pursue deals in excess of US$1bn, while no food companies were looking at deals of that scale.
The more general consumer goods sector has also shifted its M&A focus more back towards investment in domestic and mature markets, which EY said EY said was down to greater trust in mature market supply chains and appetite for greater economic and political stability.
Food respondents also remain significantly focused on cost reduction and operation efficiencies (49%) rather than driving growth next year (42%).
Blaise Girard, EY’s global head of consumer products & retail transaction advisory services, commented: “While companies are looking to acquire to stave off competition, it remains to be seen if the sector is in fact being bold enough.”