Food & Beverage M&A Update — Q1 2023
In February, the CPI for Food recorded the lowest reading since April 2022. (Photo: Unsplash)
Tamarack Partners released its Q1 2023 Food & Beverage M&A Update in collaboration with The Food Connector. Last year, the Highly Pathogenic Avian Influenza (HPAI) outbreak, Ukraine conflict, and economy-wide inflationary pressures contributed to a 9.9% increase in U.S. food prices, the largest annual increase since 1979. Cost inflation challenged smaller players’ ability to pass through price increases and many companies traded non-core business lines for high-growth, high-return opportunities. On the other hand, inflation provided a big boost for publicly-traded companies who achieved double digit sales growth and profit improvements fueled by price increases.
Silicon Valley Bank’s (SVB) failure in early March will have broader implications for food venture financing. In addition to direct SVB exposure for some companies (Omsom, The Better Meat Co., Tea Drops and others), stricter lending requirements and a greater focus on free cash and profitability will further limit the ease with which small companies access capital and enter the industry. We may see industry consolidation as larger companies find themselves in a position to acquire cash-strapped early-stage and emerging brands.
AgriFoodTech accounted for 8% ($51.7 billion) of total venture capital (VC) funding in 2021. In 2022, investment in the sector declined by nearly half — in line with global VC markets — to $29.6 billion. Despite 2021’s outlier performance, ESG (environmental, social and governance) impact continues to drive investor interest in alternative protein, vertical farming and food waste start-ups. The cultured meat category is expected to attract huge inflows of venture capital in 2023 as the U.S. nears regulatory approval.
Also included in this report:
M&A commentary by sector and acquirer group
Insight from industry partner Barry Friends
Spotlight on notable deals
Listed transactions
Tamarack Partners provides M&A advisory services to owners of lower middle market companies. For more information on this report or to speak with one of our transactional advisors about your business, Contact Us.
