M&A in Specialty Food Distribution is Heating Up
February 14, 2023 By Yana Persky
Specialty Food M&A Outlook
Specialty food wholesalers are playing an increasingly important role in the rapidly growing specialty food market. According to the Specialty Foods Association (SFA), the market nationwide was estimated at $175 billion in 2021 and is projected to reach $198 billion in 2023. Consumers’ desire for a variety of fresh, healthy and sustainable options is driving the specialty food market’s growth, as well as the increasing diversity of the US population.
Recent research by the SFA has revealed that more than 75% of consumers purchase specialty foods, and we’ve witnessed a flurry of mergers and acquisitions involving specialty distributors. The trend towards consolidation is largely driven by regional fragmentation and the need for larger companies to establish a wider presence in the marketplace.
During 2022, many high-profile transactions were announced, signaling continued consolidation of the specialty food market: for example, Sysco Corporation completed the purchase of The Coastal Companies in February 2022. Michigan-based specialty foods distributor Lipari Foods was acquired by an investment group led by Littlejohn & Co., a Greenwich, Connecticut-based private investment firm. And Indianapolis-based fresh food distributor FreshEdge LLC was sold to Wind Point Partners LLC in Chicago.
Food & beverage operation efficiency: trending towards consolidation
Food wholesalers are facing pressure from big retailers with a self-distribution model 3PL logistic providers and online competitors, making it difficult for them to remain competitive. The changing landscape of food distribution and the need to play in the specialty category have been the driving force behind increasing M&A activity.
With digitalization becoming more widespread, many businesses are looking for ways to make their operations more efficient. By consolidating operations, food wholesalers can scale up their business and take advantage of new digital platforms. This has also led to increased investor interest, as investors seek companies that can provide them both with new hot categories and an advantageous competitive edge.
The importance of scalability in the food and beverage industry
The importance of scalability cannot be overstated. As technology continues to evolve, food wholesalers need to be able to quickly adapt to meet changing customer demands. This is why so many investors are looking for companies that have the potential to scale up their operations and reach new markets.
By investing in companies with established systems and processes, investors can ensure that they are getting the most bang for their buck. Specialty food wholesalers need to be able to quickly expand their operations and customer base in order to keep up with the ever-changing landscape of the food distribution industry. By ensuring that their processes are efficient and streamlined, food wholesalers can make sure that they are ready to scale when the time comes. This means having the necessary infrastructure and technology in place to quickly add new customers, increase capacity, and adjust pricing according to market conditions. Additionally, it is important for food wholesalers to have access to capital that can be used to finance expansion efforts. By having the right processes, resources and capital in place, food wholesalers can ensure that they are prepared to take advantage of opportunities when they arise.
The importance of digitalization in the food and beverage industry
As food wholesalers look to keep up with customer demands in this increasingly digitalized space, they are turning to digital technologies and platforms that can provide an easy and seamless shopping experience.
Digitalization has become a key factor in mergers and acquisitions of food distributors. Digital platforms can automate processes such as order fulfillment, inventory management and payments, which can greatly improve efficiency and accuracy. Using digital tools, food wholesalers can gain competitive advantages by being able to better manage their operations and build relationships with customers. Additionally, with greater access to data, businesses are better equipped to make sound decisions based on real-time customer feedback. Food wholesalers can use this data to further customize their offerings and offer products that meet specific needs.
Planning a business exit strategy
For specialty food wholesalers looking to maximize their exit strategy, selecting the right technology partner is key. Unified B2B commerce is the latest trend in B2B business that makes it possible for companies to connect all of their sales channels in one single platform, eliminating the need for manual data entry and streamlining processes across multiple sales channels. This allows buyers to make purchases from any source, such as B2B eCommerce, mobile order taking by sales reps in the field, route accounting, inside sales and more.
As the demand for unified commerce continues to grow, Pepperi is seeing more businesses, including specialty F&B distributors, turn to this technology to gain a competitive edge in the B2B commerce space and eventually being acquired.
With a unified B2B commerce platform, food wholesalers can sync their sales channels and back-end systems in a single, comprehensive platform. This allows them to gain visibility into their entire operation, streamline their processes, and optimize performance. With real-time data, they can analyze trends and make smarter decisions based on reliable insights.
By utilizing a unified B2B sales platform, food wholesalers turn their growth into profits, increase efficiency, improve customer satisfaction and boost their brand loyalty. All of these factors combined will result in a stronger business exit strategy and increasingly drive M&A activity in the specialty food distribution space.