GPs hungry for Benelux's food and beverages sector

Francesca Veronesi
01 August 2019

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Large deals inked in the first half of the year have confirmed the attractiveness of Benelux-based food and beverages businesses. Francesca Veronesi reports

Two deals announced in the first half of 2019 have confirmed Benelux's status as an attractive region for large-cap transactions in the food and beverages sector. PAI had its €885m offer for Euronext Amsterdam-listed Wessanen agreed in April, while CVC sold Belgium-based food company Continental Foods – once part of the Cambpell group – to Barcelona-based strategic buyer GBFoods for around €900m-1bn in May.

From 2014 to date, Benelux has surpassed all other European regions in terms of large-cap buyouts in the sector, thanks to PAI's acquisition of Refresco, valued at €3bn, in Q1 2018, as well as KKR's €6bn carve-out of Unilever's spreads division (since then rebranded to Upfield) in Q4 2017.

Food and beverage deals in the small- and mid-markets may not stand out from other European regions in terms of value and volume from 2014, but, overall the sector represents a high percentage of the region's buyout activity. The total volume of deals represents 7.25% of all Benelux buyouts in the 2014-2019 period - the third highest percentage after southern Europe and CEE (both around 9.5%). In France, buyouts in the sector represent 5.75% of overall activity; and for the UK, DACH and Nordic region it is less than 3%.

Asked why the region's food and beverages sector is attractive, Gilde Equity Management partner Bas Glas says: "The historical presence of large corporates such as Unilever and Royal Friesland Foods, a plethora of smaller and mid-sized entrepreneurial companies, as well as research and educational centres of expertise, such as University of Wageningen, create a dynamic ecosystem for food and beverage companies."

Indeed, 12 of the world's largest agri-food companies have major production or R&D sites in the Netherlands, including Cargill, Heinz, Monsanto, Unilever, Mead Johnson, ConAgra and Mars, according to the Netherlands' Foreign Investment Agency. Says Glas: "For many decades the Dutch have been educated in navigating a variety of food cultures, and therefore the food offer is extremely varied compared with other regions in Europe." Additionally, Belgium hosts businesses offering additives, packaging, equipment and services provided to agri-food companies, and biotechnology companies operating in the sector, according to the Belgian Federal Government.

Changing tastes
The food sector was traditionally considered a safe haven for investors, but the sector has gone through rapid changes in recent years. "For one, an increasing focus on healthy, locally sourced, and organic products has helped new players make inroads in the market and encouraged well-established businesses to innovate," says Glas. For example, Wessanen has had an exclusive focus on sustainable and organic food since 2015.

Moreover, Benelux-based corporations are acquiring or investing in smaller businesses with the aforementioned features, creating much needed exit pipelines for private equity investors active in, or considering, the sector. For instance, Heineken wholly owns Beerwulf, an online retailer selling craft and speciality beers founded in 2016. Unilever acquired a Dutch producer of meat and fish substitutes, The Vegetarian Butcher, in December last year. Glas adds that supermarkets, after many years of consolidation, have diversified their product ranges: "Both low-budget and high-end private label products are becoming established, which in turn threatens branded players. They also offer a broader range of ready meals and fresh meals than previously." In addition, convenience has become a defining trend, as evidenced by the explosion of tech-enabled takeaway and delivery services.

Consumers have more exacting demands than before, and plenty of choice. Private equity investors are therefore approaching a sector undergoing important and opportunity-creating transformations. But they are also faced with new challenges, including stricter regulations on food safety and changing consumer demand in terms of ESG. "Sustainable sourcing and operating of the supply chain require continuous attention," says Glas, before adding that "full prices" in Benelux and elsewhere in Europe are being paid for by high-quality food and beverages assets.