This article is brought to you by DHG Private Equity.
Maybe we’re getting carried away with the health craze that’s sweeping the food industry. But that and other emerging trends are creating a feeding frenzy among corporate and private equity buyers.
Last year, Brynwood Partners picked up Lightlife, which makes soy-based meat substitutes. In June, specialty food manufacturer TreeHouse Foods announced it was buying the nut-and-dried-fruit company Flagstone Foods for a multiple of more than 13 times EV/EBITDA. And there was the belly-buster deal for Hillshire, the producer of Jimmy Dean sausages, finally landed by Tyson for a sizzling $7.7 billion.
Wait, sausages? Shocking disclosure: It’s not all about health.
Yes, everyone’s obsessed with calories and weight loss. Food companies have responded with a dizzying menu of “natural,” “organic,” “low-carb,” “fat-free,” “sugar-free,” and “hormone-free” choices, scientifically based or not. Never mind that, as a recent WSJ article pointed out, taking the gluten out of food often removes nutrients as well. Now they tell us.
But along with the “good-for-you” trend, there’s the equally powerful and conflicting impulse for cheap, good-tasting stuff. And since 50 percent of Americans earn $45,000 or less, premium-priced snacks and goodies are beyond the economic reach of many consumers.
Randy Schwimmer shares his perspectives in MidPoints each issue. A former member of senior management and investment committees for two leading middle-market debt platforms, he is also founder and publisher of The Lead Left, a weekly newsletter about deals and trends in the capital markets.