HW&Co. Industry Reader Template
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FOOD AND BEVERAGE INDUSTRY UPDATE │ NOVEMBER 2015 www.harriswilliams.com Investment banking services are provided by Harris Williams LLC, a registered broker-dealer and member of FINRA and SIPC, and Harris Williams & Co. Ltd, which is authorised and regulated by the Financial Conduct Authority. Harris Williams & Co. is a trade name under which Harris Williams LLC and Harris Williams & Co. Ltd conduct business. FOOD AND BEVERAGE INDUSTRY UPDATE │ NOVEMBER 2015 WHAT WE’RE SEEING CONTENTS MARKET UPDATE . INDUSTRY VITAL SIGNS . EQUITY MARKET OVERVIEW M&A activity within the food & beverage industry continued its momentum into . M&A MARKET OVERVIEW the fourth quarter. With over 220 transactions reported year to date in North . DEBT MARKET OVERVIEW . RECENT M&A ACTIVITY America, the industry continues on pace with levels seen in 2014. HW&Co. PUBLIC COMPARABLES expects this level of activity to continue through the end of the year and into . EARNINGS CALENDAR 2016 fueled in part by the desire of strategic buyers to reposition their business, accelerate growth, add new product categories, and realize cost synergies. GROUP OVERVIEW Recently announced transactions that reflected this trend include AB inBev’s Harris Williams & Co. is a leading advisor to the food and $117.4 billion acquisition of SABMiller, Treehouse Foods’ purchase of ConAgra’s beverage market. Our significant experience covers a broad range private label business for $2.7 billion, and Snyder’s-Lance’s acquisition of of end markets, industries, and Diamond Foods for $1.9 billion. business models. This particular report focuses on trends and metrics in the following areas: . Agribusiness WHAT WE’VE BEEN DOING . Baked and Prepared Goods . Beverages . Branded and Private Label CLOSED HW&CO. TRANSACTIONS . Dairy . Distribution . Ingredients . Meat and Protein . Natural and Organic a portfolio company of a portfolio company of . Processing . Produce has been acquired by has been acquired by . has been acquired by Restaurant and Retail has been acquired by . Snacks A Private Investor Group CONTACTS Glenn Gurtcheff Managing Director [email protected] +1 (612) 359-2702 Tim Alexander Managing Director a portfolio company of a portfolio company of has divested selected assets [email protected] to +1 (612) 359-2716 has acquired Ryan Budlong and has been acquired by Director has been acquired by [email protected] +1 (415) 217-3409 Brant Cash Director [email protected] +1 (612) 359-2709 Ryan Freeman Vice President [email protected] a portfolio company of a portfolio company of a portfolio company of +1 (612) 359-2703 Andy Warczak has been acquired by Vice President has been acquired by has been acquired by has been acquired by [email protected] +1 (612) 359-2714 and www.harriswilliams.com PAGE | 1 FOOD AND BEVERAGE INDUSTRY UPDATE │ NOVEMBER 2015 WHAT WE’RE READING U.S. MILLENNIALS TWICE AS LIKELY AS NON- MILLENNIALS TO DISTRUST LARGE FOOD MANUFACTURERS According to a report from Mintel, 43% of U.S. Millennials stated that they do not trust large food companies, as compared to only 18% of non-Millennials. Both Millennials and non-Millennials, at 74% and 69%, respectively, would like further insight into the manufacturing process. The data confirms a shift toward transparency and sustainability, with 59% of Millennials saying that they would stop purchasing a brand’s products if they are viewed as unethical. Access to the full article here. WORLD FOOD PRICES RISE FOR FIRST TIME IN 18 MONTHS Data published by the United Nations’ Food and Agriculture Organization (“FAO”) shows that world food prices rose in September for the first time in nearly 18 months. Though the increase was less than 1.0%, it is a notable change from the 5.2% decrease seen in August, which represented the largest monthly decline in seven years. Largely-stagnant commodity prices, combined with overproduction and reduced demand, had driven the FAO index to a six-year low. Access to the full article here. KRAFT HEINZ TO CLOSE SEVEN PLANTS, CUT 2,600 JOBS Kraft Heinz recently announced that pursuant to its cost synergy initiatives, it will close seven manufacturing facilities and lay off 2,600 North American employees, representing nearly 6% of its workforce. Production will be shifted into other existing North American facilities over the next two years. Expense trimming at Kraft Heinz and Anheuser Busch InBev, driven by private equity firm 3G Capital, is putting pressure on publicly-traded food companies to increase profitability through cost cutting. Access to the full article here. VITAL SIGNS COMMODITY PRICE INDICES1 140 Soybeans: 120 (27.5%) 100 Corn: (39.6%) 80 Wheat: (43.3%) 60 Crude Oil: Commodity Price Index 40 (53.7%) Oct-11 Apr-12 Oct-12 Apr-13 Oct-13 Apr-14 Oct-14 Apr-15 Oct-15 Corn So ybeans Wheat Crude Oil PROTEIN PRICE INDICES2,3 150 Beef: 140 32.4% 130 Pork: 5.8% 120 Poultry: 110 0.4% 100 Protein Price Index 90 Sep-11 Mar-12 Sep-12 Mar-13 Sep-13 Mar-14 Sep-14 Mar-15 Sep-15 Beef Pork Poultry PAGE | 2 FOOD AND BEVERAGE INDUSTRY UPDATE │ NOVEMBER 2015 VITAL SIGNS RESTAURANT AND GROCERY STORE SALES INDICES4 140 Restaurant: 120 23.7% Grocery: 100 Sales Index 9.0% 80 Sep-11 Mar-12 Sep-12 Mar-13 Sep-13 Mar-14 Sep-14 Mar-15 Sep-15 Restaurant Grocery CONSUMER FOOD PRICE INDEX INFLATION2 5.5 4.0 2.5 Inflation (%) 1.0 (0.5) Sep-11 Mar-12 Sep-12 Mar-13 Sep-13 Mar-14 Sep-14 Mar-15 Sep-15 PUBLIC EQUITY MARKET OVERVIEW KEY TRADING STATISTICS5 Stock Price % Change EV/EBITDA % Change Current Valuation Stats Net Debt / Industry and Segment 3 Month 1 Year 3 Month 1 Year Fwd PE LTM PE EV/EBITDA EBITDA Protein Processing (1.3%) (11.4%) 1.2% (28.7%) 11.5x 13.0x 5.4x 2.6x Fruit and Vegetable 2.3% 18.3% 4.2% (1.6%) 16.2x 20.5x 11.1x 1.0x Ingredients / Flav ors (1.8%) 12.7% (1.7%) 14.1% 20.2x 26.5x 14.8x 1.8x Inputs Agribusiness (10.6%) (19.3%) (10.8%) (19.5%) 12.5x 14.2x 8.1x 1.8x Branded Processed Foods 0.1% 10.2% 2.5% 14.0% 21.3x 30.9x 14.5x 2.6x Private Label Foods and Beverages (9.6%) 5.7% (3.9%) (7.6%) 33.0x 35.2x 12.3x 5.5x Natural / Organic Foods / BFY (20.4%) (4.5%) (16.8%) (12.1%) 25.7x 54.8x 18.1x 3.7x Baked Goods 3.1% 3.1% 11.2% 21.6% 24.8x 32.6x 14.2x 3.1x Dairy (0.4%) (1.6%) (3.9%) (3.3%) 20.1x 24.7x 10.5x 1.9x Non-Alcoholic Beverages (0.2%) 5.3% 1.0% 8.4% 20.5x 23.7x 13.1x 1.8x Alcoholic Beverages (0.5%) 8.3% (2.2%) 7.6% 21.7x 24.2x 14.1x 2.8x Food Beverage and Snacks 5.7% 13.9% 0.7% 6.2% 25.2x 30.9x 13.6x 2.2x Grocery Distribution (2.7%) (4.3%) (3.0%) (18.1%) 18.9x 18.6x 8.5x 2.0x Food Retail (1.6%) (4.3%) (2.7%) 3.7% 18.4x 20.3x 7.5x 2.0x Foodservice 9.6% 6.1% 6.8% (1.1%) 20.8x 31.2x 10.7x 6.5x Quick Service Restaurant (13.9%) 10.1% (12.6%) (7.1%) 21.9x 28.4x 12.5x 2.5x Fast Casual (18.3%) (17.8%) (13.2%) (34.6%) 38.7x 37.3x 10.8x 0.7x Differentiated Casual (16.8%) (3.2%) (12.1%) (6.4%) 29.4x 39.1x 11.0x 2.0x Casual Dining Restaurant (20.3%) (11.5%) (12.9%) (20.7%) 19.9x 29.1x 7.8x 2.1x Fine Dining (10.5%) (4.1%) (11.8%) (19.9%) 16.4x 19.1x 9.9x 2.8x Consumer and Retail Pizza (20.3%) 14.6% (13.5%) (1.8%) 27.4x 39.7x 14.6x 3.7x Beverage / Snack Retail (2.6%) 1.4% (8.9%) (12.6%) 33.3x 31.3x 18.8x 2.9x Family Restaurant (11.0%) 5.2% (14.6%) (7.9%) 24.1x 23.6x 10.8x 2.4x Overall Median (4.2%) 3.1% (4.5%) 0.8% 21.3x 26.9x 11.7x 2.3x PAGE | 3 FOOD AND BEVERAGE INDUSTRY UPDATE │ NOVEMBER 2015 PUBLIC EQUITY MARKET OVERVIEW PUBLIC COMPANY SECTOR PERFORMANCE (ONE YEAR CHANGE IN STOCK PRICE)5 Fruit and Vegetable Pizza Snacks Ingredients / Flav ors S&P Branded Processed Foods Quick Serv ice Restaurant Alcoholic Bev erages Foodserv ice Priv ate Label Non-Alcoholic Bev erages Family Restaurant Baked Goods Bev erage / Snack Retail Dairy Differentiated Casual Fine Dining Food Retail Grocery Distribution Natural / Organic / BFY Protein Processing Casual Dining Restaurant Fast Casual Agribusiness (30.0%) (15.0%) 0.0% 15.0% 30.0% 45.0% 60.0% 75.0% 90.0% Inputs Food and Beverage Consumer and Retail RECENT EQUITY OFFERINGS6 Gross Proceeds Close Date Filing Date Issuer Ticker Transaction Type ($mm) Use of Funds 10/26/15 07/02/15 Del Taco Restaurants Inc TACO Follow-On $46.5 Secondary 10/19/15 09/15/15 GreenSpace Brands Inc JTR Follow-On $1.1 Acquisition Fin. Working Capital 10/19/15 10/19/15 Ballast Point Brewing PINT IPO $172.5 General Corp. Purp. 10/06/15 10/06/15 Spot Coffee (Canada) Ltd SPP Follow-On $1.6 General Corp. Purp. Reduce Indebtedness 10/01/15 09/09/15 Performance Food Group Co PFGC IPO $275.5 General Corp.