Does the number of pet food mergers and acquisitions (M&A) over the past month, spanning December 2020 and the beginning of January 2021, indicate that pet food is set for a dynamic year? Or at least one of continued change.
Despite all the crises and upheaval of 2020, that year still saw more than 25 pet food deals among companies, suppliers and related retailers. And that was before December. In that month alone, J.M. Smucker sold its Natural Balance brand to investors; TA Associates, a private equity firm, bought Mid America Pet Foods; and Inspired Pet Nutrition, the UK producer of Harringtons and Wagg pet foods, announced that its majority shareholder, L. Catterton, had agreed to a sale to CapVest Partners LLC.
There was also a deal on the supplier side, with Layn Natural Ingredients acquiring Wagott, a Chinese exporter of green tea extract. Meanwhile, in pet retail, Barkbox, the online purveyor of custom and subscription-based toy and treat boxes for dogs (which now also has a custom dog food service, Bark Eats), merged with North Star Acquisition Corp., making it a publicly traded company; and Nordic agricultural giant Felleskjøpet Agri bought Dyrekassen AS, Norway’s leading online pet store. Whew!
Several pet food deals in first few days of 2021
Now, just in this first week of January—the first couple of business days of the year—several more pet food deals have been announced. First, BrightPet Nutrition Group (which was itself acquired by A&M Capital Partners in October 2020) said on January 4 that it is buying MiracleCorp. and its portfolio of products, including freeze-dried and other pet treats under the Stewart brand.
That same day, Manna Pro, maker of pet treats and other animal nutrition products, announced it is acquiring Bullymake, a direct-to-consumer (DTC) dog treat subscription service for “power chewer” dogs. Then Dane Creek Capital, which has been among the most active in the pet food M&A space the past few years, especially with raw pet food companies in Canada, said its United Raw Pet Foods subsidiary will buy Growlies Pet Food, a Canadian pet specialty retailer focused on raw foods. This is Dane Creek’s and United Raw’s first acquisition into pet retail; that this information was included in the press release makes me believe it will not be the last.
Online and retail focus, plus supply chain integration
With the COVID-19 pandemic sending e-commerce into hyperdrive in 2020—which is only continuing this year and is expected to keep growing even after the viral beast is finally under control—it’s no surprise that some of the deals mentioned here, as well as others earlier in 2020, involve online pet retailers or DTC subscription services for pet owners. Interest in such companies is also likely to continue.
Yet much of the recent pet food M&A activity also echoes trends we’ve seen for several years now: a mix of big names, whether companies or brands, as well as smaller players; strong activity in the supplier and retail sectors, as well as the manufacturing/marketing side of pet food; and, perhaps most striking, a blending of such sectors that, at least for the parent companies, integrates the supply chain to some extent.
Most recently, it’s agricultural conglomerates like Felleskjøpet Agri in Norway or pet food manufacturing brand owners like Dane Creek buying pet retailers. A few years ago, it was deals like ADM, the ingredients giant, acquiring Crosswinds, a contract and private label pet food and treat manufacturer, in 2017, or the reverse, with C.J. Foods, a larger private label premium pet food maker, buying Lortscher Animal Nutrition, an ingredients supplier, in 2018.
C.J. made another splash in early 2020 when it bought American Nutrition, another pet food manufacturer (private label and its own brands). The deal included a division called Veracity Logistics, further integrating the company’s supply chain. (C.J. subsequently renamed its combined manufacturing side as Alphia and the ingredients side as LANI.)
What does this all mean for 2021 and beyond?
Will such integration continue, and will we see even more pet food M&A deals this year and after? The strong start to 2021 may say yes. No matter what, the activity to date provides proof that pet food remains a vital, vibrant market on the upswing, no matter the prevailing events and currents.