Pitcher Partners’ latest report has shown A$600 million of M&A activity in the sector for the first half of 2018, after a bumper 2017 had a A$2.8 billion total.
The acquisitions of Koroit dairy facility, Noisette bakery and Darrell Lea Confectionery lifted the FMCG sector. The company reported that almost two-thirds of consumer deals by value were in the food sector in the first half of 2018, above the long-term average of 15 – 20 per cent.
Pitcher Partners Melbourne partner – corporate finance, Michael Sonego, said although the total M&A deals in 2018 doesn’t meet the past year – the momentum it’s currently at has attributed to the continued interest to invest in Australia. Buyers have taken advantage of the high demand for Australian food products, particularly from the Asian market.
“This year is likely to be a little down on 2017 but we are seeing it leading towards a very strong 2019. I think the food sector is an attractive area for everyone. We have had private equity firms in here every week looking at the health food and drink category. It is increasingly on their radar,” Sonego said. “So, you have the private equity firms, but also the larger international players – it is attractive to foreign investors and foreign businesses looking to access the Asian market via Australia.”
Sonego said the local food and beverage sector was also benefiting from increased domestic demand, which has also lured interest from overseas investors.
“The Australian economy has done well comparatively for some time and that has increased demand for good quality food products. Asian middle-class families continue to seek good quality foods for themselves and their families and there are big food safety concerns, which combined with the clean, green, image of Australia in the marketplace, has increased domestic demand for Australian produce,” added Sonego.
Pitcher Price boss said that despite the food and beverage sector being a strong performer, its future performance will be dependent on how it meet demands of future global customers.
“Maintaining a greater share of food processing onshore and better differentiating Australia’s food products from competitors are essential elements of the food and beverage sector’s future road map,” he said.
Pitcher Partners also recently worked with the US-owned company OSI Group, which expanded its Australian operations through a merger with family-owned poultry and cheesemaking group Turi Foods.
The domestic demand for craft beers has also exceeded the growth in demand for mainstream beers in Australia with the Perth-based Gage Roads Brewing recently acquiring Matso’s Broome Brewery for A$16.44 million.