Investment Deals Are in the ‘Center Aisle’ | FTI Consulting

Attention Shoppers: Investment Deals Are in the ‘Center Aisle’

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The FTI Journal continues its look at opportunities for private equity in distressed M&A given the pandemic-affected economy. Here is a snapshot of food & agriculture.

What we ate — and how we ate — before COVID-19 seems like a lifetime ago.

Up until the start of the pandemic, many consumers looked beyond traditional comfort foods, opting instead for healthier fare, for which they were willing to pay a premium. Venturing into the international aisle for new tastes was in. If our cupboards were bare, we might consider going out to a restaurant.

Today, the food consumption landscape is radically different. The pandemic has resulted in significant changes to what we’re eating. Forget kale. Consumers are not so venturesome. They want value items with long shelf lives.

We’re spending less time browsing grocery stores and supermarkets and more time buying food online, where shopping feels safe. Even when we do visit a market, we prefer to get in and out as quickly as possible, which changes where we push our carts in-store. Instead of browsing the perimeter, where the new and innovative items are displayed, we stick to the center aisles for comfort food, processed foods and staples.

Anything that’s simple to prepare is highly appealing. Eggs look to be big winners for their long shelf life, versatility and “protein bump.” They’re morning stars again with the resurgence of breakfast as people return to a three-meals-a-day routine.

Now in the midst of a recession, consumers will continue to shop frugally — a trend that may be the “new normal” for many years post-pandemic.

What should investors have on their shopping lists? Large food-service brands, particularly those that will need to increase retail grocery volume from plant and production lines. The largest of these will also shift to a model focused on their power brands to take advantage of demand for brand names consumers know and trust. In turn, that will leave their lesser-known brands in need of focused attention — the manufacturers may divest some of these, which will present excellent carve-out opportunities.

Investors should also be heading toward the frozen food aisle, where better-known brands will continue to hold most of the shelf space. Startup brands will likely struggle as they compete for attention.

Read the full introduction to this series "Creative Destruction vs. Created Destruction." To learn more about specific distressed M&A opportunities in Food & Agriculture, visit our Distressed M&A Outlook Series collection.

© Copyright 2020. The views expressed herein are those of the author and do not necessarily represent the views of FTI Consulting, Inc. or its other professionals.


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Keith F. Cooper

Senior Managing Director, Leader of Performance Improvement