Food & Beverage In Focus: Auctus Capital Partners Highlights Sector Trends and Deal Drivers with 2023 ‘Fancy Food Show’ Recap

Food & Beverage In Focus: Auctus Capital Partners Highlights Sector Trends and Deal Drivers with 2023 ‘Fancy Food Show’ Recap

Conferences and industry trade shows are making a comeback for the first time since the onset of the pandemic. The Specialty Food Association’s (SFA) Fancy Food Show marked the first of many events Auctus Capital Partners will attend in 2023.

The SFA Show brought a range of leading F&B stakeholders to the Vegas Convention Center, from food artisans, purveyors, importers and entrepreneurs to distributors, retailers, and others involved in the specialty food trade. Auctus Capital Partners — including Carl Cordova, Managing Director and leader of the growing Food & Beverage sector within the firm’s consumer industry network — was among the 13,000 industry executives in attendance.

Check out industry insights from our team, with updates on the key takeaways, themes and issues that were top of mind coming out of the conference:

Future of Food: The Lower Middle Market Exhibits Resilience Amid Macroeconomic Challenges

The widespread increase in cooking at home that resulted from the pandemic has had a lasting effect. Innovation in meal kits, packaging, prepared foods, and overall simplicity have shaped trends as fatigued consumers try to balance cooking with returning to work out of the home.

At the same time, ongoing inflation and fears of a recession have impacted consumer behaviors. Many families are getting more selective about how they spend. Investors and others looking to acquire companies that make or sell products for consumers are getting choosier for much the same reason.

While the Fed’s intervention to curb rising inflation has started to show signs of a softer landing, F&B companies continue to face challenges with supply chain delays, higher costs and overall unpredictability. The impact of the pandemic fundamentally changed how operators view sourcing and logistics. While larger market players maintain pricing power and more leverage with global suppliers, the lower middle market faces ongoing price increases for raw materials and shipping costs that have been difficult to pass on.

Fortunately, after a year of price adjustments, a large majority of investors believe valuations in 2023 will remain stable or even track higher than 2022. For F&B businesses, however, remaining focused on staying agile is critical to protecting their bottom line.

The factors that restrained M&A in 2022 may remain with subdued activity in the short term, but indictors point to a strong deal environment for 2023 — and the pivot to the lower middle market will continue to tee up opportunities for F&B businesses that are able to adapt with demand driving trends.

Tradeshow Takeaways: Trending Opportunities for Food & Beverage Leaders

In the US, specialty food sales account for over $148 billion (in 2019), and more than 50 categories of food and beverages were called into focus at the Fancy Food Show. Among many, the brands and products in the most advantageous position for growth or targeted for acquisition are those that make home cooking more convenient and restaurant-quality, as well as healthy alternatives that are developed and sourced responsibility.

Exhibitors leading the way showcased in-demand qualities, including:

– High-Quality Meal Prep: In 2022, many investors hit pause to focus on understanding consumer behavior and examine how families will spend money over the next few years. Without question, consumers have ambitions to keep up their pandemic-era home cooking but lack time. The Show brought several meal starters, sauce starters, frozen meals, and other shortcuts to the forefront. F&B brands that can evoke these characteristics will not remain on the sidelines.

Sustainability Efforts are Now Table Stakes: The greater importance on climate change is a purchase driver, as the health of the environment continues to be a top consumer concern. Brands that take it seriously earn loyalty. More products that are responsibly grown, ethically sourced, use upcycled ingredients, or contain sustainable packaging are moving up the chain faster.

The Cross-Border Pantry & Fridge Evolution: Demand for global cuisines and associated flavors and ingredients is growing. At the Show, a crop of internationally inspired condiments, sauces, oils, and seasonings that bring global tastes to consumers at home are leading the way. Additionally, with elevated snacking during the pandemic, this trend has extended to dips, cookies, and small items that previously were considered an occasional treat.

Upcycled Foods Must be Tasty: Each year, 108 billion pounds of food is wasted in in the US. That equates to 130 billion meals and more than $408 billion in food thrown away each year. Innovative companies are turning surplus food and byproducts into high-value, specialty items for the modern foodie by Upcycling food — the process of transforming ingredients that would otherwise be wasted.

The Future of CPG Packaging is Cheesy: The demands of retailers to satisfy consumer wants and needs, the trends, innovation and sustainability in cheese packaging, for example, reflect coming innovation and opportunities industrywide. According to the SFA, innovative packaging that addresses portability and convenience, as well as creative ways to consume traditional products, is leading innovation from meal cups to tea discs to freeze drying products like candy and salsa.

Fermentation for Function: Fermentation is an actively growing $846 billion industry. Fermented foods and beverages are topping lists of food trends, dietitian superfood recommendations and restaurant menu ingredients as consumers gain understanding of the importance of digestive health to overall well-being.

Focus on Health: Immune-boosting foods are top of mind, from beneficial beans that provide protein alternatives and better-for-you snack options to innovative formulations that use ingredients from mushrooms, seaweed and jackfruit. These categories are of great interest, as well as functional foods that help show signs of improved gut health and cognitive function, as well as more allergen-free and all-natural foods or options for staples like pasta and bread.

Cocktail Culture On the Rise: Ready-to-drink beverages and alcohol-free options are dominating in the ever-evolving cocktail world. Consumer demand sophisticated, well-crafted, and flavorful options in elegant packaging, and the interest from investors remains.

From the Conference Tradeshow Floor to the Conference Room

Having spent their careers building specific knowledge of the companies, trends, and insights relevant to the firm’s industry-specific focus areas, Auctus’ senior bankers are often called upon to attend events. Our team accompanies clients, shares insights as speakers or in round table discussions, and otherwise enjoys great opportunities to connect with partners and network with a range of lower and middle market leaders.

While this year’s Fancy Food Show highlighted many critical trends shaping the F&B sector, it importantly reminds us that 2023 will bring about significant change.

The increasingly complex needs of lower middle market businesses require innovative and customized solutions for corporate development and financial services, including mergers and acquisition, debt or equity capital raising, fairness opinions, restructuring or other advisory support.

In the Food & Beverage space, operators demand greater attention and support from investment banks to help navigate shifting markets and source deals. Auctus Capital Partners exists to help in this regard.


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