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On December 5, 2013

Petfood mergers and acquisitions poised to reshape the market

The petfood market is ever more concentrated thanks to hot M&A activity, expected to continue in 2014 and beyond

Petfood is a concentrated, top-heavy market, with the top two companies alone (Mars Petcare and Nestlé Purina PetCare) accounting for nearly 50% of sales. The top 30 companies comprise at least 70% of the market (see p. XX). Much of that concentration is due to continued merger and acquisition (M&A) activity, which never really slowed down during the global recession and has really heated up in the past few years. Expect it to continue this year and beyond.

"The private equity community has developed a modest fascination with the pet industry over the past five years," wrote Bryan Jaffe, senior vice president for Cascadia, in 2011. "Interest has accelerated markedly since 2007, as evidenced by deal volume. Notably, deal volume grew from 2009-2010 in contrast to the broader consumer marketplace, which contracted."

For proof, just look at the list Pets International magazine keeps updated on its website, www.petsinfo.net/m&a. While it covers M&A transactions for the entire pet care industry, you'll notice many petfood-related ones as you scroll down the list.

To recap petfood  M&A activity of significance over just the past two years:

  • April 2012-Merrick acquires Castor & Pollux Natural PetWorks (a little more than a year after being acquired itself by Swander Pace, an investment firm);
  • July 2012-Continentale Nutrition is acquired by two investment firms as it merges with Villeneuve Petfood; in August 2013, amid reports of financial difficulty, Continentale sells two of its dry production plants to United Petfood Producers;
  • October 2012-C&D Foods acquires Arovit, becoming the second-largest private label manufacturer in Europe (behind Saturn/Heristo); in October 2013, C&D sells one of its acquired dry petfood facilities to three independent investors, forming Arovit Dry Petfood A/S;
  • March 2013-Dutch petfood manufacturer Mitte Wolen is acquired by Laroy Duvo, a Belgian pet supplies company;
  • May 2013-Affinity Petcare, a European-based petfood company, enters the Brazilian market by purchasing a 50% stake in Mogiana Alimentos;
  • Also in May-Natural Balance Pet Foods signs a merger agreement with Del Monte Foods (which was acquired itself in 2010 by a group of investors);
  • July 2013-Vitakraft's owners, the Wührmann family, sells the company to private label petfood manufacturer Deuerer and an unnamed private investor, though the Wührmanns retain a minority share;
  • Also in July-Partner in Pet Food acquires the petfood division of Agro-Trust (PPF was itself acquired in 2011 by private equity firm Advent International);
  • October 2013-Del Monte sells its human foods business to a subsidiary to focus on its pet products and says it will rename the company accordingly.

Del Monte's last  announcement, while more of a divestiture than true M&A, makes this list because it represents a major player's overt intent to push for a larger share of the petfood market. In fact, with Procter & Gamble telling investors in September that it is seeking to sell its under-performing business units, likely including its petfood brands-Iams, Eukanuba and Natura-speculation arose that Del Monte could make a bid for one or even all three brands. (Incidentally, all were acquisitions for P&G, the latter occurring just in 2010.) That type of deal would constitute a major shake-up of the petfood competitive landscape.

None of this activity even touches on the rampant consolidation happening in the pet retail distribution sector in the US and Europe. US distributor consolidation will be discussed during Petfood Forum 2014, one of three new discussion sessions debuting next year. Find more information at http://www.petfoodindustry.com/49727.html.

Learn more

Read about past petfood M&A at www.petfoodindustry.com/6994.html.

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May 2015

The May 2015 issue of Petfood Industry focuses on the expanding pet food company, Pipeline Pet Products, and how new product development is helping the company to grow in the US market. Also, learn about emerging pet food markets like Asia-Pacific as expenditures on pet products continue to grow. And as specialty pet foods continue to grow in all markets, products claiming “natural” or “organic” status are climbing to the top of consumers’ lists.

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