Health & Nutrition Industry 2011 Census

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  • 1. Marco V. Galante, Principal J.H. Chapman Group, L.L.C. 773-693-4800 [email_address] Health & Nutrition Industry 2011 Census Trends in Mergers and Acquisitions
  • 2. Contents
    • Objective of Census . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
    • Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
    • Sub-Segment Analysis and Commentary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
      • Healthy, natural, organic, functional foods and beverages . . . . . . . . . . . . . . . . . . 9
      • Health and nutrition ingredients suppliers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
      • Contract manufacturers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
      • Branded nutritional supplements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
      • OTC and natural personal care products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
      • Licensing and joint ventures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
      • Retailers and distributors of these products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
      • Conventional ingredients suppliers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
    • Recent Financings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
    • J.H. Chapman Group, L.L.C. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
    J.H. Chapman Group, L.L.C. makes no representation as to the accuracy and completeness of the information provided. The information in this presentation is obtained from various public sources. In the listings of Acquirers and Targets, the columns are blank if amounts are unavailable. Please do not reproduce it for third parties, but notify us of others who would like to receive it and we will contact them directly.
  • 3. Objective of Census
    • Provide for market participants a Census of M&A activity and trends in the sub-segment of their industry, within the $5 million to $100 million transaction value range.
    • Identify, where applicable, future trends that are likely to have an influence on transaction activity and valuations.
  • 4. Executive Summary M&A Transactions While the 2011 M&A transactions for the total food industry sector eked a small increase of 7.6% over 2010, the “Food & Beverage Processor” category declined by 21% (55 transactions in 2011 versus 77 in 2010). The following information is a summary of M&A activity in the health and nutrition sector, followed by statistical information for each identified segment.
    • Licensing and joint ventures continued to grow, with an increase of 26% over 2010. This trend is a strong indicator of companies seeking alternative strategic options for growth.
    • Organic and Functional Food & Beverage
    • This category continues to be the largest M&A contributor accounting for 51% of the transactions. This expanding area enjoyed an increase of 28% above 2010 and double the number of 2006 transactions.
    • Health and Nutrition Ingredients Suppliers
    • As the second largest transaction contributor, this category was 39% higher than in 2010, achieving the highest number of transactions since 2006.
    • Branded Nutritional Supplements
    • Transactions in 2011 were flat with one transaction less than that of 2010 and 2006.
    • Licensing & Joint Ventures
    • An increase of 26% to 53 transactions indicates that companies seeking growth are pursuing other ways and means in addition to traditional M&A.
    • Health and Nutrition
    • Steady and growing M&A activity is reflective of 2011 in the Health and Nutrition Sector. Objectives were focused by acquirers on strategic transactions supporting their growth and to augment their product and application offering.
    • In the health and nutrition category, there were a total of 109 transactions in 2011 (excluding licensing, joint ventures, financing, retail and distribution), an increase of 20% over 2010 and a substantial increase of 56% over the peak of 2006. The organic/natural food and beverage sector was the largest contributor with 51% of the total, followed by health and nutrition ingredients suppliers at 23%.
  • 5. Executive Summary (cont’d)
    • Financing
    • While the first half of 2011 experienced some easing in the capital markets, this appeared to slow in the second half. At 38 financings, 2011 was 22% below that of 2010.
    • Growth Prospects
    • Companiesandmarkets.com predicts that the functional beverages market will experience the highest growth at 8.8%, rising from $57 billion to $87 billion over the five-year period. Nutraceutical foods will be the second highest growth at 8.4% – making it achieve an estimated $49 billion in five years time.
    • Economic and Market Environment in 2011
    • The US Economy
    • Regardless of investor positive sentiment or underlying financials, all it took was scary news from Europe and/or Capitol Hill to send markets into a funk!
    • Despite that volatility, growth in financial markets exceeded expectations at the beginning of the year, then retreated in mid-year, but substantially
    • recovered by year-end resulting in higher growth than was expected for the year as a whole.
    • A significant factor against this backdrop is that food manufacturers are facing considerable and increasing pressure from rising commodity prices, which are making an impact on margins that are being squeezed as consumers continue to resist price increases.
    • North American M&A Activity
    • While buy and sell side activity of the first half of 2011 showed a steady pace of M&A activity in both strategic and financial acquisitions across various industries as compared to the preceding six-month period, the second half ‘stalled’ in comparison to 2010 levels.
    • That said, robust cash positions, strong balance sheets and improved credit markets, coupled with mounting pressure for growth in a low internal growth environment, are cited as strong indicators that more transactions will likely be announced during the course of 2012. Equally, the appetite for M&A increases as companies are less likely to feel inhibited by the volatile economy and the political unrest in Washington DC, as evidenced
  • 6. Executive Summary (cont’d) by the return of the large strategic acquirers. Also, buyer-seller expectation gaps are narrowing and valuations are stabilizing. Raw Materials and Food Prices – Inflation Pricing pressures and volatile commodity/input prices are cited as the most significant growth barriers in the next year, much more so than labor costs and lack of customer demand. Price levels in 2012 hinge significantly on several macro-economic factors: supply-side risks, both political and weather-related (US drought, La Nina patterns), fuel prices, and the value of the US dollar, all with considerable risks for price and volatility. However, government agency forecasts for 2012 food prices is that inflation is expected to "abate" while still slightly above the historical average for the past two decades. According to The Food Institute’s analysis of government data, the all-food 2012 CPI is projected to increase 2.5% to 3.5% over 2011.
  • 7. Sub-Segment Analysis and Commentary Natural and Organic Foods Functional Foods Nutritional Supplements Food Healthcare Pharmaceuticals Personal Care OTC Health & Nutrition focuses on those “sub-segments” at the intersection of the giant healthcare, personal care and food industries. Natural Personal Care Ingredients Suppliers
  • 8. Sub-Segment Analysis and Commentary Number of Transactions 22 12 28 28 48 NA Conventional Ingredients Suppliers 39 49 44 25 19 25 Financings 8 8 2 6 12 13 Retailers and Distribution 53 42 52 21 NA NA Licensing and Joint Ventures               109 90 52 61 62 70 Total 12 9 5 2 6 7 OTC & Natural Personal Care Products 13 14 7 14 12 14 Branded Nutritional Supplements 4 7 3 4 2 3 Contract Manufacturers 25 17 7 17 20 21 Health and Nutrition Ingredients Suppliers 55 43 30 24 22 25 Healthy, Natural, Organic, Functional Foods and Beverages               YE 2011 YE 2010 YE 2009 YE 2008 YE 2007 YE 2006 Segment Number of Transactions
  • 9. Sub-Segment Analysis Healthy, Natural, Organic, Functional Foods and Beverages Fresh Juice and fruit processing transaction activity continued in 2 nd half of 2011 Starbucks entered into the fresh juice category by acquiring Evolution Fresh for $30 million. Starbucks plans to replace Pepsico’s Naked Juice products with Evolution juice in 2012 as well as open up juice bars to compete directly with Jamba Juice. Follow-on acquisitions by Starbucks is expected in the coming years. In an effort to expand their produce offering, Dole acquired the parent company of blueberry provider SunnyRidge Farm Inc . SunnyRidge also sources and sells blackberries, strawberries and raspberries which will complement Dole’s fresh and frozen berry operations that have so far focused on strawberries. Blueberries and blackberries are some of the fastest growing items in the produce category. SunOpta Inc. announced that its subsidiary SunOpta Global Organic Ingredients acquired Lorton's Fresh Squeezed Juices, Inc., located in San Bernadino, California. With approximately $10 million in sales, Lorton’s produces citrus based products in both industrial and packaged formats. Lorton’s Fresh Squeezed Juices
  • 10. Sub-Segment Analysis Healthy, Natural, Organic, Functional Foods and Beverages Corporate Strategic acquirers remain active As part of their growth strategy, The Hain Celestial Group announced two more acquisitions outside the USA. The company acquired Europe’s Best , a leading Canadian brand of natural frozen fruits and vegetables. Europe's Best was previously a brand of Smucker Foods of Canada Corp., a subsidiary of The J.M. Smucker Company. Hain also acquired the Daniels Group , a marketer and manufacturer of natural chilled foods in the United Kingdom with three leading brands. This builds on Hain’s previous acquisitions in the UK (Linda McCartney brand in 2006 and Daily Bread in 2008) to create a strong portfolio of natural and fresh brands in the United Kingdom. Smart Balance , a leading manufacturer of heart healthy spreads and oils, acquired gluten-free food manufacturer, Glutino for $66.3 million. As the gluten-free market continues to grow, Smart Balance plans to further build upon this momentum, offering new products and building upon its existing portfolio of products. Farmer-owned cooperative, Sunsweet Growers Inc, announced their acquisition of Function Drinks . This marks the first foray into functional beverages by Sunsweet which recently developed the New Ventures Initiatives at Sunsweet.
  • 11. Sub-Segment Analysis Healthy, Natural, Organic, Functional Foods and Beverages
  • 12. Sub-Segment Analysis Healthy, Natural, Organic, Functional Foods and Beverages
  • 13. Sub-Segment Analysis Healthy, Natural, Organic, Functional Foods and Beverages
  • 14. Sub-Segment Analysis Healthy, Natural, Organic, Functional Foods and Beverages
  • 15. Sub-Segment Analysis Healthy, Natural, Organic, Functional Foods and Beverages
  • 16. Sub-Segment Analysis Healthy, Natural, Organic, Functional Foods and Beverages
  • 17. Sub-Segment Analysis Healthy, Natural, Organic, Functional Foods and Beverages
  • 18. Sub-Segment Analysis Healthy, Natural, Organic, Functional Foods and Beverages
  • 19. Sub-Segment Analysis Healthy, Natural, Organic, Functional Foods and Beverages
  • 20. Sub-Segment Analysis Healthy, Natural, Organic, Functional Foods and Beverages
  • 21. Sub-Segment Analysis Healthy, Natural, Organic, Functional Foods and Beverages
  • 22. Sub-Segment Analysis Health and Nutrition Ingredient Suppliers
    • Israeli based , Frutarom Industries announced their fifth acquisition of 2011, acquiring USA based Flavor Systems International for $35.3 million. Flavor Systems most recently reported revenue of approximately $18.4 million. With this acquisition, Frutarom intends to further build its presence in North America, entering new markets such as flavored coffees and shakes as well as savory flavors where it only has a presence in Europe. Just prior to this announcement, the company acquired, Aromco for $25 million. Aromco is a UK-based flavors company serving developing markets such as Eastern Europe, Africa and Asia. The company was founded in 1985 by Keith Brown and achieved $13 million in revenue in 2010.
    • US based, CHS Inc , a leading cooperative owned by farmers, ranchers and co-ops, announced their acquisition of Solbar , in a deal valued at approximately $133 million. CHS is a diversified energy, grains and foods business and a Fortune 100 company while Solbar is headquartered in Ashdod, Israel, and provides soy protein ingredients to manufacturers in the meat, vegetarian, beverage, bars and crisps, confectionery, bakery and pharmaceutical manufacturing markets. Both companies are publicly traded and CHS achieved sales of $25.3 billion in 2010.
  • 23. Sub-Segment Analysis Health and Nutrition Ingredients Suppliers
  • 24. Sub-Segment Analysis Health and Nutrition Ingredients Suppliers
  • 25. Sub-Segment Analysis Health and Nutrition Ingredients Suppliers
  • 26. Sub-Segment Analysis Health and Nutrition Ingredients Suppliers
  • 27. Sub-Segment Analysis Health and Nutrition Ingredients Suppliers
  • 28. Sub-Segment Analysis Health and Nutrition Ingredients Suppliers
  • 29. Sub-Segment Analysis Health and Nutrition Ingredients Suppliers
  • 30. Sub-Segment Analysis Contract Manufacturers
    • Omega Protein Corporation , an ingredients supplier and the nation's leading producer of Omega-3 fish oil and specialty fish meal products, announced their acquisition of InCon Processing LLC, a Batavia, Illinois based specialty toll processor that utilizes molecular distillation technology to concentrate a variety of compound products, including Omega-3 fish oils. This acquisition further develops Omega Protein’s vertical integration of their commercial fishery and human nutrition distribution channels. The concentrated fish oils manufactured by InCon will be marketed and sold under the Company's OmegaActivTM brand by Cyvex Nutrition, a subsidiary of Omega Protein that the company acquired in December 2010.
  • 31. Sub-Segment Analysis Contract Manufacturers
  • 32. Sub-Segment Analysis Contract Manufacturers
  • 33. Sub-Segment Analysis Branded Nutritional Supplements Florida-based, IMD Corporation, engaged in the medical diagnostics and health and fitness industries, acquired nutraceutical company Botanical Sciences. Botanical Sciences manufacturers and sells nutritional supplements targeting men’s health, sleep and weight control. Joint Juice, creator of ready-to-drink glucosamine supplements, announced their acquisition of Premier Nutrition. Premier Nutrition offers several lines of high-protein nutrition products, including ready-to-drink shakes, bars, powders and cookies. With this acquisition, Joint Juice enters into the growing sports nutrition market . In October, Private Equity Firm, The Riverside Company, acquired Biosan Laboratories, a vertically-integrated manufacturer, marketer, and distributor of premium, all-natural whole food nutritional supplements. Biosan products are sold across several channels and their Megafood and Innate Response brands recently received an investment by 2X Management. Botanical Sciences, Inc.
  • 34. Sub-Segment Analysis Branded Nutritional Supplements
  • 35. Sub-Segment Analysis Branded Nutritional Supplements
  • 36. Sub-Segment Analysis Branded Nutritional Supplements
  • 37. Sub-Segment Analysis Branded Nutritional Supplements
  • 38. Sub-Segment Analysis Branded Nutritional Supplements
  • 39. Sub-Segment Analysis OTC and Personal Care Virginia-based, Lansinoh Laboratories, a leading provider of premium products for breastfeeding moms, acquired UK-based Earth Friendly Baby. Earth Friendly Baby is a marketer of natural shampoos, bubble bath, and skin care products using organic ingredients. The company was first acquired by UK-based Healthquest in 2004. The products are primarily sold throughout the United Kingdom but are available in the US through specialty retailers and in several northeast regional Whole Foods Stores.
  • 40. Sub-Segment Analysis OTC and Natural Personal Care Products
  • 41. Sub-Segment Analysis OTC and Natural Personal Care Products
  • 42. Sub-Segment Analysis OTC and Natural Personal Care Products
  • 43. Sub-Segment Analysis Licensing and Joint Ventures
  • 44. Sub-Segment Analysis Licensing and Joint Ventures Ingredient supplier, Lonza, announced partnerships with Mesoblast Limited and Pasteuria Bioscience. Mesoblast Limited is a regenerative medicine company and the two companies have entered into a strategic alliance for clinical and long-term commercial production of Mesoblast’s off-the-shelf (allogeneic) adult stem cell products. Lonza views cell therapy as a major growth industry over the next 20 years. Lonza’s second partnership is with Pasteuria Bioscience that commercializes biological nematicides based on Pasteuria, a natural microbe found in the soil that infects and kills harmful nematodes. This arrangement will secure a process transfer and manufacturing plan to produce Pasteuria spores in Lonza’s biochemical plant in Kouřim, Czech Republic. Nutritional ingredient supplier Omniactive Health Technologies formed a partnership with Kalsec to develop natural zeaxanthin from paprika. Under the agreement, OmniActive will educate consumers and increase awareness of the health benefits of zeaxanthin, while developing delivery forms and distributing them to the marketplace. Pepsico and Theo Muller Group teamed up to launch an unnamed yogurt brand. This joint venture will allow Pepsico to enter the US dairy market for the first time as the company is targeting to grow its nutritional and functional foods product portfolio to $30 billion by 2020. PepsiCo recently closed a $3.8 million takeover deal of Russian juice and dairy producer Wimm-Bill-Dann. New Zealand-based Fonterra and UK-based First Milk today announced a strategic joint venture to produce premium whey proteins for Fonterra’s growing food ingredients business. The premium whey proteins from First Milk Lake District creamery will be applied in Fonterra’s functional and cultured nutrition ingredients like PowerProtein™ and ElevateProtein™, based on Whey Protein 80% ingredients (WPC80).
  • 45. Sub-Segment Analysis Licensing and Joint Ventures
  • 46. Sub-Segment Analysis Licensing and Joint Ventures
  • 47. Sub-Segment Analysis Licensing and Joint Ventures
  • 48. Sub-Segment Analysis Licensing and Joint Ventures
  • 49. Sub-Segment Analysis Licensing and Joint Ventures
  • 50. Sub-Segment Analysis Licensing and Joint Ventures
  • 51. Sub-Segment Analysis Licensing and Joint Ventures
  • 52. Sub-Segment Analysis Licensing and Joint Ventures
  • 53. Sub-Segment Analysis Licensing and Joint Ventures
  • 54. Sub-Segment Analysis Retailers and Distributors
    • Nutritional products retailer GNC Holdings acquired online retailer LuckyVitamin.com for an undisclosed sum. Lucky was founded in 2004 and has revenue of approximately $40 million. With this acquisition, GNC hopes to broaden its online presence and gain more market share in the rapidly-growing discount e-commerce channel. LuckyVitamin.com sells a wide range of nutritional supplements and wellness-oriented products.
    • Tasti D-Lite , the lower-calorie frozen dessert chain catering to health-conscious consumers, acquired Planet Smoothie, LLC , a franchise system with more than 100 units in operation, mainly in Georgia and Florida. The strategic acquisition will allow both brands to broaden product offerings, improve retail sales and accelerate unit growth through co-branding initiatives and non-traditional development opportunities.
  • 55. Sub-Segment Analysis Retailers and Distributors
  • 56. Sub-Segment Analysis Retailers and Distributors
  • 57. Sub-Segment Analysis Retailers and Distributors
  • 58. Sub-Segment Analysis Conventional Ingredients Suppliers
    • The Kerry Group acquired SuCrest, a European ingredients and flavours company. The German-headquartered company provides sweet ingredients to the bakery, ice-cream, confectionery and cereal and snack sectors in Europe and had revenues of $64 million in 2010. With this acquisition, The Kerry Group will be significantly expanding their sweet ingredients & flavours business in the EMEA region. The Kerry Group also acquired Cargill Flavor Systems for a consideration of $230 million. This division of Cargill had sales of approximately $200 million in 2010. The acquisition strengthens Kerry's capability to provide integrated customer solutions across all food and beverage end-use markets.
    • Synergy Flavors, a member of the Irish based Carberrry Group , announced its acquisition of flavor company Sethness Greenleaf. The acquisition provides additional scale to Synergy in important Beverage, Dairy and Bakery markets and follows Synergy's acquisition of Sensus, which was also completed in 2011.
    Cargill Flavor Systems
  • 59. Sub-Segment Analysis Conventional Ingredients Suppliers
  • 60. Sub-Segment Analysis Conventional Ingredients Suppliers
  • 61. Sub-Segment Analysis Conventional Ingredients Suppliers
  • 62. Sub-Segment Analysis Conventional Ingredients Suppliers
  • 63. Sub-Segment Analysis Conventional Ingredients Suppliers
  • 64. Sub-Segment Analysis Conventional Ingredients Suppliers
  • 65. Sub-Segment Analysis Conventional Ingredients Suppliers
  • 66. Sub-Segment Analysis Conventional Ingredients Suppliers
  • 67. Sub-Segment Analysis Conventional Ingredients Suppliers
  • 68. Recent Financings Healthy, fast casual restaurants garner investor interest Brentwood Associate’s portfolio company, Zoe’s Kitchen received a $20 million credit facility from GE Capital. Founded in 1995, Zoe's Kitchen USA, LLC is a rapidly growing, fast casual restaurant concept offering fresh, made-from-scratch sandwiches, salads and roll-ups inspired by Mediterranean flavors. Veggie Grill, a Santa Monica based chain of plant-based comfort food, raised $11 million in its third round of funding from Brentwood Associates. Veggie Grill’s revenue increased by more than 70% in 2011 and the company has recently announced plans to expand outside of Southern California for the first time. Healthy Beverages Manpasand Beverages, an Indian juice company, received a $10 million investment from SAIF Partners. The firm is best known for its brand Mango Sip, which has a strong presence in semi-urban and rural India. Tata Global Beverages announced that the company increased their stake in The Rising Beverage Company, the maker of Activate drinks. This investment follows their $21 million investment from October 2010. The incremental investment was based on achievement of certain milestones set while making the earlier investment.
  • 69. Recent Financings
  • 70. Recent Financings
  • 71. Recent Financings
  • 72. Recent Financings
  • 73. Recent Financings
  • 74. Recent Financings
  • 75. Recent Financings
  • 76. Recent Financings
  • 77. Recent Financings
  • 78. Recent Financings
  • 79. Recent Financings
  • 80.
    • Tap into the exceptional experience of a leading investment banking firm
    • J.H. Chapman Group, L.L.C.
    J.H. Chapman Group, L.L.C.
    • Founded in 1982
    • Offices and principals in the United States (Chicago) and Europe (Paris)
    • Specialize in transactions $10 - $500 million, with clients ranging from closely held businesses to Fortune 500 corporations
    • Extensive experience representing both sellers and buyers, with most clients in North America & Europe
    • Visit our website (www.jhchapman.com) to view our transactions and track record of success
    Providing advisory services for mergers & acquisitions Specializing in the food, beverage and food ingredient industries – from raw materials/ingredients to consumer products
  • 81. Contact Information J.H. C HAPMAN G ROUP , L.L.C ® 9700 Higgins Road Suite 630 Rosemont, IL 60018 Telephone: (773) 693-4800 Telefax: (773) 693-6255 www.jhchapman.com Marco V. Galante, Principal, J.H. Chapman Group, will be pleased to respond to questions you may have concerning this information and the services of our group. [email_address]