Why Health and Wellness will continue to drive growth and inorganic activity in global Food and Beverages.
2019 was a year in which conversations about Health and Wellness in the Food and Beverage industry centred around Plant Based diets and No or Low alcohol beverages.
But these are just two examples of the successful outperformance of the $700 billion Health and Wellness category. Since 2013, Health and Wellness products have outgrown overall Food and Beverages in 9 out of the top 10 countries by market size. Globally this translates to 100 basis points (bps) of outperformance for Health and Wellness. Driven by superior pricing power, Health and Wellness assets also generate gross margins that are on average 750-950bps higher than their peers. With consumer interest in Health and Wellness growing globally, the segment is expected to continue to outperform and capture share from other categories.
These dynamics have made Health and Wellness assets attractive strategic targets. Our analysis shows that Health and Wellness focussed assets have doubled their penetration of deal volumes since 2012. Health and Wellness assets also command premium valuations – approximately 30 percent higher than those of the sector overall.
We expect Health and Wellness trends to increasingly influence portfolio decisions. This will result in continued high levels of competition to acquire quality Health and Wellness assets, but also disposals of assets that are not aligned to strategic objectives, or are ‘caught in the middle’ between Health and Wellness and Indulgence. Non-core disposal activity will create exciting opportunities for acquirers who want to drive consolidation and synergies in their category, or acquirers who are experienced in driving value from complex carve-outs and lower growth businesses.
In a competitive Mergers and Acquisitions (M&A) environment, buyers and sellers of assets need to be more proactive and disciplined than ever.
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