After much consolidation in the fish oil sector, probiotics, enzymes, and fiber could be the ingredient categories to watch moving forward for M&A activity, says the CEO of the Nutrition Capital Network.
The second biggest transaction of 2013 in the nutrition and health & wellness sector was the acquisition of omega-3 manufacturer Epax by FMC Corp for approximately $345 million. The deal was the fourth in a run in the omega-3 space following the acquisition of Martek Biosciences and Ocean Nutrition Canada by DSM in 2011-12, and of Pronova BioPharma by BASF in 2013.
The deals significantly consolidated the omega-3 fish oil sector, and any future potential activity may be with algae-derived oil and specialty oil.
“There was so much biofuel money going into algae that diversified into nutrients that there are lots of development players there,” Grant Ferrier, CEO of the Nutrition Capital Network told NutraIngredients-USA. “We also see interest in krill and plant oil companies but these will be smaller deals.”
So beyond omega-3, what are the ingredient sectors to watch? “We've see colors and flavors to some extent with Frutarom leading the way globally,” said Ferrier. “And there is also interest in probiotics, enzymes, and fiber, so those may be categories to watch.”
An organic powerhouse
NCN’s Transaction Database indicates that the overall the pace of transactions in 2013 was brisk at volumes similar to 2012. This indicated a sustained interest by the investment community in the nutrition and health & wellness space, said NCN.
The largest transaction of 2013 was in the organic food category as WhiteWave Foods acquired the organic packaged produce company Earthbound Farm for approximately $600 million.
“WhiteWave started life in its founder’s garage and Earthbound in a 2.5-acre backyard. The combination of these pioneering brands has created a powerhouse in the organic food industry,” said Mike Dovbish, NCN Executive Director.
There were 10 transactions in the supplement sector in 2013, which was fewer than the 17 and 19 recorded in 2012 and 2011, respectively. Between 2010 and 2013 there were 61 supplement M&A transactions, said Ferrier, valued in excess of $10 billion.
“You've got some big deals there over the years,” he said, “including $4 billion for NBTY in 2010, $1.4 billion for Schiff, $650 million for Avid, $360 million for Alacer, and 7 to 8 others at $100 million or more.”
There were four hot categories in 2013, according to NCN data, including:
1. Healthy food for babies and children: There were three significant deals in the first half of 2013 as Plum Organics (Campbell), Happy Family (Danone), and Ella’s Kitchen (Hain Celestial) were snapped up by strategic buyers.
“These young companies have experienced explosive double digit growth and are transforming a traditional, unimaginative category with innovative packaging and organic ingredient profiles,” observed Dovbish.
2. Raw pressed organic juice companies, with Suja receiving an $8+ million minority investment from Boulder Brands Investment Group, followed in January 2014 by an investment from Alliance Consumer Growth.
“These new micro-juiceries could eventually become acquisition targets along the lines of Evolution Fresh Inc. (purchased by Starbucks in 2011) and Blueprint (Hain Celestial, 2012),” added Dovbish.
3. The online marketplace was distinguished by Internet-enabled farm-to-consumer and farm-to-business platforms, with Aglocal, AgSquared, FarmersWeb, Farmigo, and Good Eggs either raising investment or making acquisitions.
“Until recently, farming and agriculture have seen little in the way of innovation in the form of technology-enabled tools,” noted Dovbish. “With the adoption of mobile devices and advancement of geolocation technology, startups have addressed this market and investors are taking note.”
4. Healthy home delivered meals and ingredients, with Gousto, Relay Foods and Blue Apron all raising capital.
So what’s on the horizon for 2014? Ferrier told us that Q1 is generally slow, and there have not been too many headlines so far. “But leading Canadian supplement brand Jamieson Labs was bought by private equity, and so was the top 3 practitioner supplement seller Atrium, so professional investors are still finding value in supplements.”
NCN has convened 19 investor meetings since 2007 and claims that, among all companies that have presented at NCN investor meetings, 49% have found financing or completed a transaction.