M&A activity is forecast to accelerate in 2025 as food and beverage companies deal with fewer outside distractions and place greater importance on dealmaking to grow their businesses.
The lion’s share of the M&A activity is expected to be smaller bolt-on transactions as companies increase their exposure in fast-growing, trendy areas such as premium, snacking and health and wellness.
“We’ve seen an uptick in M&A activity in the food and beverage CPG space over the past six months to a year,” Billy Roberts, a senior food and beverage analyst with CoBank, said in an interview. “That’s going to continue and get even greater, proliferate a bit in 2025.”
Last year averaged fewer than 500 deals per quarter, a nearly 40% decline from the 2021 to 2023 period, the cooperative bank noted in a report issued last November. But conditions that previously chilled dealmaking appear to be thawing, creating opportunities for CPG companies.
Interest rates have declined, which makes it less expensive for businesses looking to take on debt to finance a transaction. Many firms that borrowed billions to finance a blockbuster deal during the last decade have paid down much of that debt and possess healthier balance sheets. This increases the likelihood that they’re willing to pull the trigger on a larger-sized acquisition.
Other factors have increased the likelihood that companies engage in a deal. After years of facing challenges brought on by COVID-19, supply chain disruptions and sky-high inflation, conditions have eased.
The improved environment comes as businesses that previously depended on price increases to foster growth are dealing with inflation-weary consumers reluctant to pay more, leaving them to search for other ways to boost revenue and margins. This makes M&A a more attractive option.
“There are gaps in portfolios,” said Brittany Quatrochi, an analyst at Edward Jones. “What I do think we’ll see is bolt-on M&A, and we’ve already started seeing it with these portfolio pruning and optimizing.”
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‘Never say never’
Last year, General Mills announced it would sell its North American yogurt business, which includes brands such as Yoplait and Go-Gurt, for $2.1 billion to focus on faster-growing areas including snacks and pet food. PepsiCo snapped up Mexican-American food maker Siete Foods for $1.2 billion in October, giving it heightened exposure to ethnic foods and better-for-you offerings that complement its less healthy snacks like Doritos and Cheetos.
The biggest deal in 2024, however, was Mars’ purchase of Pringles maker Kellanova for $36 billion which would transform the candy icon into a leading seller of chips, crackers and other treats. Analysts said it’s unlikely that deals this year will replicate the massive size of Mars-Kellanova transaction.
“It seems like a difficult environment for large-scale M&A,” Quatrochi said. “Never say never but I don’t think that’s really on the radar of U.S. companies.”
Executives have said they remain on the lookout for companies to buy, but most likely will purchase a smaller firm if they do make an acquisition.
“It seems like our focus right now, and what we see in the marketplace really, is probably more availability of smaller sized assets that we could bolt-on that would enhance our growth,” Jeffrey Harmening, General Mills’ CEO, told analysts in September.
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Courtesy of General Mills
Sean Connolly, CEO of Slim Jim and Healthy Choice manufacturer Conagra Brands, said the Chicago-based company is focused on paying down debt it took on as part of its $10.9 billion purchase of frozen food maker Pinnacle Foods in 2018. “That means that when it comes to acquisitions, we’re really not talking more than bolt-ons,” Connolly noted, pointing to Conagra’s purchase of premium meat stick brand Fatty last summer.
Mondelēz International said in December the Oreo and Ritz cracker maker also will prioritize smaller “bolt-on” deals.
Dirk Van de Put, CEO of Mondelēz, told Wall Street analysts last February that his snacking company looks at 35 or 40 potential M&A targets at the beginning of each year and, if necessary, starts establishing a relationship to build trust and familiarity with the smaller businesses. The majority of them never lead to a deal.
A potential wildcard for M&A in 2025 and beyond could come from the new Trump administration.
The president-elect has selected Robert Kennedy Jr. to head the Department of Health and Human Services, giving him wide-ranging authority over the FDA which regulates around 80% of the country’s food supply. Further uncertainty could come depending on how aggressively the Federal Trade Commission and Justice Department clamp down on M&A under the new administration.
During Trump’s first time in office, businesses viewed him as being hands-off. He’s widely expected to be business-friendly again during his second term, at least compared to the Biden White House, but just how much is unknown. If Trump is more aggressive, M&A activity could be chilled.
“That’s a tough call to make,” Roberts said. “It’s one that we’re going to have to watch very closely.”
