Page 10 - Food&Drink magazine July 2022

INDUSTRY REPORT
LEFT: Lion’s acquisition of the Fermentum Group delivered five established alcohol brands: Stone & Wood, Two Birds, Fixation, Little Drago, and Sunly Seltzer.
(Left to right: Stone & Wood founders Ross Jurisich, Brad Rogers, and Jamie Cook.)
BELOW: For Treasury Wine Estates, purchasing Frank Family Vineyards was about building its luxury portfolio and strengthening its presence in the US.
2LARGE NON-FOOD BUSINESSES
Not all strategic acquisitions came from within the food industry and there may be strategic reasons why a non-food and beverage business would do so.
In 2021, fitness training company F45 purchased family-owned Australian nutritional supplements group True Protein, with a view to distributing product through its own network of 1700 fitness studios globally.
3PRIVATE
EQUITY
Private equity uses private investor funds to acquire all or part of food and beverage businesses. They seek to improve their financial performance through operational measures or synergies with other
related acquisitions prior to divesting them.
Private equity was involved in several 2021 transactions including Accolade Wines (Carlyle Group) acquiring Rolf Binder in premium wines, and Openway Food Co. (Five V Capital) acquiring Annex Foods, Metro Foods, and Table of Plenty.
Corporate funded private equity is increasingly an option to assist growth. This is particularly so in 2022, with
IN 2020:
10%
GROWTH IN SALES OF FOOD AND BEVERAGE COMPANIES.
businesses including Australian Plant Proteins, EVR, Lauds, Fenn Foods, All G Foods, Harvest B, and Fable Foods all receiving investment or selling.
4
This category of non-strategic buyers includes private owner/operators buying food and beverage businesses
and either managing them directly or appointing an operational manager.
These acquisitions typically produce the lowest sale multiples, since the incremental gains that an outside investor gains from buying a business are likely to be lower than a strategic buyer.
However, the more efficient the business for sale is, and the less dependent it is on the existing owner, then the more valuable that business is.
There are eight key assets that determine the likely future growth and profitability of
a business:
1. Financial – Effective management systems in place to manage production, inventory, cash flow, and opex/capex.
2. Product – A recognisable, solid selling range of products driven by market need, with a pipeline of new products.
3. Customer – Understanding what excites customers as well as what builds and retains their loyalty.
4. People – Businesses that value their employees and inspire loyalty and performance by investing in, and motivating them.
5. Systems – Well organised internal and market facing digital platforms to manage processes ranging from cybersecurity to food safety risks.
6. Competitive – A vision for the evolution of the business, along with the requisite partnerships and technology to enable omni-channel operations.
7. Brand – A positive public perception of all aspects of a brand ranging from ethical ingredient sourcing to food preparation tips.
8. Intellectual Property – This can range from “secret
sauces” which gain and retain customer loyalty, to formalised and organised proprietary knowledge of the company CRM.
NEXT STEPS
Food and beverage owners planning an exit need to think long term and set goals.
There are three fundamental questions you need to ask:
• What is my business
currently worth?
• What is my goal exit
valuation and when do
I wish to exit?
• How do I close the value
gap between 1 and 2?
This opens a series of strategic questions to be addressed in future articles.
To download the Food and beverage Business Sales Market Update 2022, visit groves.com. au/fb1a/. ✷
✷ ABOUTTHEAUTHOR
PRIVATE
INVESTOR
10 | Food&Drink business | July 2022 | www.foodanddrinkbusiness.com.au
Mark Ostryn is a senior
adviser with Groves &
Partners. His professional
expertise and experience
in Australian food and
beverages guides owners on lucrative ways to build and present their businesses for maximum sale value.