Analysts Expect More Food Mergers in 2025
With less aggressive enforcers taking over the Department of Justice and Federal Trade Commission, analysts anticipate that mergers and acquisitions will increase in 2025. Food industry experts project that dominant brands and private equity firms will buy more mid-sized companies, threatening innovation, price competition, and jobs.
The total number of food and beverage deals has declined over the past three years, from a height of 859 in the first quarter of 2022 to just 416 in the second quarter of 2024. Dealmaking has declined for many reasons, including high interest rates, supply chain instability, and food inflation. Executives also said they feared more aggressive antitrust enforcement under President Biden.
By the numbers, the first Trump administration challenged about as many deals as the Biden administration, but the focus of each administration’s enforcement differed. Trump’s antitrust enforcers were criticized for targeting the president’s perceived enemies, such as Time Warner (parent company of CNN), automakers that agreed to California emissions standards, and cannabis businesses. Biden antitrust enforcers spent more time changing the rules of antitrust law by bringing novel cases and revising merger guidelines and pre-merger reporting requirements. This willingness to take on challenging cases or enforce laws that had not been enforced for decades made some corporations think twice about acquisitions.
Large food corporations may feel more brazen about taking big swings in 2025. President-elect Trump has floated lawyer and policy advisor Gail Slater and current Republican FTC commissioner Andrew Ferguson to head the Department of Justice Antitrust Division and the Federal Trade Commission, respectively. Both Slater and Ferguson are expected to have a more permissive approach to mergers.
Dealmaking already increased 10% over the course of 2024. In August, Mars announced plans to acquire Kellanova, which would be the largest packaged food merger since Kraft-Heinz. Mondelez followed suit in December with a bid to takeover Hershey, which Hershey turned down.
While these mega-mergers make headlines, analysts expect more deals between mid-sized companies, which feel pressure to combine for inorganic growth. For instance, the cooperative lender CoBank expects that food categories with many small players and slow category growth, such as plant-based meats, will consolidate more soon. Health and sustainability-minded startups are also targets for acquisition, particularly by dominant food corporations that want to diversify and buy up innovation. For instance, General Mills’s CEO told analysts that the company will focus on acquiring “smaller-sized assets that we could bolt on that would enhance our growth.”
That means more deals like PepsiCo’s recent acquisition of Siete Foods. PepsiCo owns many major snack brands including Doritos, Cheetos, Lays, Ruffles, Sun Chips, and more. According to former vice president of grocery for Whole Foods, Errol Schweizer, PepsiCo controls 50% or more of the snack aisle in many metropolitan areas. Acquiring a health-conscious and mission-driven innovator like Siete helps ensure that things stay that way. The deal may expand access to Siete products, but it will not stop Pepsi from pushing its broader line of ultra-processed foods.
Private equity firms will also likely drive more mergers in 2025, both as asset buyers and sellers. Reuters reports that private equity is sitting on $4 trillion of undeployed capital that will fuel more takeovers next year. At the same time, private equity firms have held on to many food and beverage companies longer than expected. Alex Masters from Lincoln International told Just Food that private equity owners could sell off many companies this year, which will prompt more mergers and acquisitions.
The standard private equity business model flips companies the way others do houses, but unlike a home renovation, private equity ownership tends to burden businesses with more debt, deplete their assets, and even bankrupt them. More private equity takeovers of food manufacturers, groceries, or restaurants could spell asset-stripping and job losses, particularly in food retail.
What We’re Reading
Smithfield has filed for an initial public offering on the US stock exchange. Last year, Smithfield’s owner, China-based WH Group, said it may put 20% of its stock up for sale, an estimated value of $5.38 billion. (Food Dive)
Congress has kicked the can down the road in passing a new Farm Bill. Advocates fear the new Republican-controlled Congress will cut funds for SNAP and conservation. (Civil Eats)
Animal advocacy groups sued to challenge a district court ruling that would allow USDA to shift some pork inspection duties from USDA officials to meatpacking plant workers. (Express U.S.)