agri food beverages - industry report october 2017 …...3 developments in agri, food &...

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Developments in Agri, Food & Beverages

Industry Report, October 2017

October 2017 edition

M&A Worldwide is with ourpartnersallaroundtheworld,andthe Agri, Food & Beveragespecialist group, always alignedwith the sector development, newdemands and strategicrequirements, which allows us tobe a valuable M&A partner instrategic business decisions,buying,selling,valuation,etc.

Thisreportcoversmarketoutlook,articleswith focus on hot subjectsinthesectorandrecentM&Adealsin the Agri, Food & Beveragesindustry.Feel free to contactM&AWorldwide members for furtherdialogue.

M&AWorldwide

TheNetworkforMergers&Acquisitions

Established in 2004, M&A Worldwide is a leading globalalliance of mid-market merger & acquisition specialists. M&AWorldwide has 42 member firms operating in 42 differentcountries.Allmembersarecloselylinkedinaglobalalliancetoadvise clients on mergers, acquisitions, divestitures, joint-ventures,capitalraising,andotherstrategictransactions.

In2016, themembersofM&AWorldwideclosed641deals inforanaggregatevalueofoverUS$3.7billion.

M&AWorldwideisabletoprovidespecializedM&Aconsultantsin a variety of industries who are willing to share theirknowledge and insights on various sectors. For moreinformation,pleasevisitwww.m-a-worldwide.com

& Beverages IntroductionIntheconstantlyevolvingAgri,Food&Beverageindustry,newkeytrenddriverspopupontheagendaeverydayandrequirefocusinarapidlychangingworld,withpopulationgrowth,globalclimatechange,growingeconomyandnewmarkets.Someofthepleasantmainkeydriversandcustomerdemandsaresustainability,traceability,ecologyandconvenience.

Industry Report

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M&A in Agri, Food & Beverages

GlobalM&AReview

The global M&A market continues thegrowthfrom2016andisbytheendofQ32017 at a volume of $2,147 BN. Cross-Borderdealshaveincreasedfrom21%in2015to50%in2017.

Private equity remains amajor driver ofglobal M&A, but closer scrutiny of thenumbers reveals that PE deals are alsogetting bigger. The average value of PEtransactions between 2015 and today isalmost 12 per cent higher than between2012and2014.

Debtcontinuestoberelativelycheapandreadilyavailableandfundsareflushwithcash on the back of recent record-breakingfundraisings.

As a result, PE firms are chasing biggertargets and taking advantage of thesynergies in managing fewer assets toexit. This dynamic is also resulting inmore consortium acquisitions – not onlybecause of the efficiencies involved butalso to prevent funds from becomingoverexposed to a small concentration ofinvestments.

And the trend for bigger deals is itselfdrivingactivity–firmsareeatingthrough

their funds more quickly, bringing them

back to the market for capital moreregularly and creating further pressure tobuy.

M&AActivityinAgri,Food&BeveragesThe most influential development in theAgri,Food&Beveragessectorsofarin2017was Amazon’s $13.7 billion acquisition ofWhole Foods Market, an Americansupermarket chain exclusively featuringfoodswithoutartificialpreservatives,colors,flavors,sweeteners,andhydrogenatedfats.

Thestrategicimplicationsofthedeal,whichisoneofthebiggestretailmergersinyears,is that Amazon get access to Whole Foodstreasure trove of consumer data aboutgrocery buying habits and patterns.Secondly, Amazon gets in control overWhole Foods’ strong “365” private brandproduct, that helps Amazon to offer moredifferentiatedproductstoitscustomersandto support Amazon’s increasing verticalintegration,whichtraditionallyoffershighermarginsthanthird-partybrandedproduct.

Another significant deal was the ReckittBenckiser Group PLC acquisition of MeadJohnson Nutrition Co for US$17.8 billion.MeadJohnsonisagloballeaderinpediatricnutrition with more than 70 products inover 50marketsworldwidewith amissiontonourish theworld's children for thebeststart in life. Reckitt Benckiser alreadyreaches millions of mothers through itshygiene education programs and throughworld class brands such as Nurofen andMucinex.

The online food industry is witnessingconsolidation due to intense competitionandaslowdownininvestments.Amidthee-retail euphoria, food technology is still oneofthemosttalked-aboutsegments.

The culture of eating outside is now

accompanied equally by the comfort ofgetting the food delivered at home,thereby providing a push to the onlinefoodmarket. Online restaurant booking,onlinefoodorderinganddeliverymarketis mushrooming with the changinglifestyle of modern urban households,resulting in an abundance ofmany “me-too”players.

Thus, to strengthen their presence anddeepen their service/product offerings,the players are making acquisitions orenteringpartnershipswithrivals.

The packaged food industry is seeing agreater push, on the back of increasingdisposable income of the consumers,improvingstandardsof livingandashiftin food habits. To capitalize on theopportunities offered in this growingsegment, domestic and internationalplayersareexploringtheinorganicrouteto expand their offerings and cater to alargermarket.

M&ARationaleCompanies will continue to seek bothinnovative and transformativetransactions to complement organicgrowth. Investors’ receptivity toenhanced scale and synergistic strategicfits, as demonstrated by encouragingacquirer stock price reactions, andshouldsupportthistrend.

WithongoingmodestglobalGDPgrowthexpected, a strong M&A marketperformance in nearby future will benecessary to accelerate expansion. Asmarkets adjust to ongoing political andregulatory changes, the M&A marketshould be buoyed by strongfundamentals and the potential for pro-businesspolicychanges.

Opportunities may emerge from

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M&A in Agri, Food & Beverages

potential newU.S. policies, such as cashrepatriation, corporate tax reform andmore modest regulation. Alongsideregulatory uncertainty, the greatestthreat to M&A activity is equity marketvaluations,which ended at all-time highlast year, and the related risk ofoverpayingforassets.

The likely result is a larger stockcomponent in deal offerings to bringsome balance to valuations. In addition,regulatory scrutiny for largetransformative transactions will mostlikelycontinue,atleastpartiallyoffsetbyahigherdealcount.

An increased activity is expected fromprivate equity fund, that are likely tocome under pressure to deploy theirsubstantialavailablecapitalinthenearbyfuture.

The following themes will impact theinclinationtodealmaking:

• An active M&A market seems tocontinue, as companies facecontinued pressure to complementmodestorganicgrowth.Activitywillbe encouraged, in part, by low costof funding and positive acquirersharepricereactions.

• Regulatory uncertainty will remain.The impact of US president Trump,Brexit,andincreasedregulatoryandpolitical scrutiny in China inaddition to several key globalelections and administrationchanges will contribute toregulatory uncertainty, which mayhave an adverse effect oncompanies’ readiness to pursuecomplex deals with a possiblelengthypathtocompletion.

• Cross-border transactions willcontinue to provide a source ofvalue creation. As companiescontinue to look for strategicgrowth, new regions provideexposure to different economic-,market-andconsumerdynamics.

• Activist investors will remainprominent. Activists continue toprove adept at challengingcorporate strategies andexpandingtheirinfluenceglobally.

• Acquirers experienced generallyneutral to slightly positive stockpricereactionsto lastyears’deals,which may be viewed by theboardsofpotentialacquirersasanendorsementofdealactivity.

Source:EY:Transactions2017;J.P.Morgen:2017M&AGlobalOutlook;Forbes:Amazon'sAcquisitionofWholeFoodsIsAboutTwoThings:DataandProduct.

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Countries on the Radar

ArgentinaArgentinaisaleadingcountryintermsoffood production with vast naturalresourcesandanextremelyfertileland.Inthe first half of 2017,Argentina exportedfoodproductsforUS$12billion,soybeansand its sub products, fishing products,meatandwinebeingthemostrelevant.

Main export destinations were India,Brazil, Vietnam, Spain, the United States,Chile, and Indonesia, among others.During 2017,M&A activity inArgentina’sAgri, Food & Beverages sector has beendynamic. After acquiring a stake inMastellone Hermanos S.A. in 2010, ArcorS.A., one of the world leading candyproducers, increased its shareholding by4.9%forUS$14million.Also, Viñas de Argentina S.A., the winebusiness unit of local conglomerateCartellone, was sold to Vicentín S.A., anintegrated agribusiness company.Bioceres S.A., a biotechnology firm,acquired 91% of Chemotecnica S.A.(farming supplies) resulting in a US$10million deal. Finally, through its localsubsidiary, Bunge Ltd. acquired all of theequitycapitalofAceiteraMartínezS.A.

DenmarkThe Top 10 rank of companies inDenmark includes Arla, Carlsberg andDanishCrownwhich shows the value ofthe Agri, Food & Beverage sector inDenmark. Considering those companies’strategy, acquisitions and the sector ingeneral, they all focus on sustainability,traceability, ecology and conveniencewith export focus. The Brexit decisionhas made some changes in acquisitionpolicies of the big 3. Danish Crown hasacquired Easey Holding Ltd. a big pigfarm, to secure their platform andproduction in UK. Arla continues theiracquisitions of dairies both in Denmarkandabroadwithfocusonecology.

Foreign companies such as NorwegianOrkla strengthen their position inDenmark by acquiring SR Food A/S.Latest Norwegian Credo Partners hasacquired Geia Foods A/S. The economicenvironment is good and back on solidtrackwithgrowthrateof2%.

FranceThe 2017 French M&A activity is at itspeak since 2007 with amore thanUS$140bnintransactionssofar.

In theAgri, Food andBeverage industryalone,35dealsand 40LBO and capitalraising transactions have already beenclosedsincethebeginningoftheyear*.

French food companies already make37% of their turnover abroad, butexternal growth is increasingly a keysuccess factor. Thus, Bonduelle (theworld leader in the ready-to-eatvegetables sector) took over theAmerican company Ready Pac FoodsforUS$409minFeb2017,andLactalistook control ofStonyfiel forUS$875min July 2017. Stonyfield was asubsidiaryofDanonewhowasobliged,bytheFederalTradeCommissionoftheUnited States, to be sold off Danone´sacquisition of Whitewave forUS$12.5bnthepastyear.

Finally, Saint Hubert was sold forUS$720m to the Chinese conglomerateFosun, who wants to become a majorplayerontheFrenchmarket.

*source:CFnews

ItalyTheItalianM&Amarketinthefirsthalfof2017recorded390transactionsforavalue of 16.6 billion euros (132inbound transactions for a value ofabout 9.7 billion euros, and Italianoperations abroad were only 75transactions totaling nearly 3 billioneuros).

The number of operations within thedomesticmarket also grew:during theperiod under review, 183 operationswerecompletedagainst145inthefirsthalfof2016.

Very small, medium-sized companieswere very active, we register only 8deals with a transaction value of over100 million. The contribution ofmechanics, food, and fashion Marketsrepresentmorethan50%ofthetotal.

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NetherlandsThe Netherlands boasts more than 4,000companies in the Agri, Food & Beveragessector (10% of GDP). In fact, 12 of theworld’s largest agri-food companies havemajor production or R&D sites in TheNetherlands, including Heinz, Monsanto,Unilever,Marsandmanymore.

RecentM&AactivityinTheNetherlandsinthe Food Industry involved a rumor of apossiblemerger betweenKraft Heinz andUnilever,whichwouldmake it the largestM&A deal since 2000. The second largesttakeover in the food industry is theannouncement of Refresco NV to acquireCottBeverages,a largesupplierofprivatelabelcarbonatedsoftdrinks,forroughly€1 billion. In themidcap section, the thirdlargestDutch PE house Egeria announcedthe acquisitionofDutchBakery, a€100mrevenues specialist in low-oxygenpackagedbreadproducts.

RomaniaRomania is currently the most dynamiclarge market in the EU, with the highestGDPgrowthinEuropeof5.8%inH12017aftera4.8%growthin2016.

In 2016 vs. 2015, the purchasing powerincreased with 12% while consumptionregistereda13.5%growth.

In the first seven months of 2017,compared with the same period of 2016,Romanian food and beveragesconsumptionwentup6.6%.

In H1 2017, food retail opened 145 newstores, after some 250 were opened in2016.

Newinternationalplayersinfoodretail,aswell as international fast food andrestaurants announced entry onto theRomanianmarket.

An interesting development in 2017 inRomania is the "Street Food Festival" - amovementwhichisgainingmomentumallover the country and includes Gourmet,TraditionalRomania,Fusionetc.attractingnumerouscustomers.

CrossborderM&Adeals in theF&B sectorinRomaniainH12017:MexicancompanySigmaAlimentoshasacquired51%of theshares of Caroli Foods Group, a packagedmeatsproductcompanyinRomania.

UnitedKingdom

UK food companies have seen anincreased appetite from internationalinvestors partly due to favorableexchange rates, but more importantly,the UK market remains extremelyattractive. In addition, private equityinterest remains strong with theacquisitions of Karro Food Group byCapVest and LDC’s acquisitions of HillBiscuitsandAddoFoodGrouptonameafew.

Finally, the drinks sector has seen anincrease in activity with breweriescontinuing to attract investors withhealthier soft drinks and juicemanufacturersbeingthepreferred.

UnitedStatesThe status of Mergers and Acquisitionswithin the food and beverage sectorremainsstrongintheUS.

Food Producers continue to be favoredby both Strategic- and a select group ofFinancial(PEG)buyers.

Some consolidations and mergers arealso noted, even in the lower middlemarket among family owned businessessuch as in baking, candy, and specialtyfoods.

There has been continued consolidationwithinthebakingsector.

Beveragesremainstrongwithinterestinspecialty beverages such as Kombuchaandflavoredteas.

There has also been interest in Agribusiness, especially in berries and fruitproducers.

Multiples have remained strong forsellers.

Countries on the Radar (cont.)

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Profi - the most dynamic retail networkownedbyMidEuropaPartnersPE fund-hasregisteredin2016aturnovergrowthof 39% compared to 2015. It is followedbyMegaImage,ownedbyAholdDelhaize,withaTOgrowthofover21%andLidl'ssalesgrowthofover18%.

In 2017, the expansion of the modernretail in Romania continues while newinternational retail chains announcedmarket entry into Romania - the mostdynamiclargemarketintheEU.

In H1 2017, the retail sales of food,beverages and tobacco in Romania haveincreased by 3.5% compared with thesameperiodof2016.

The sales of food, beverages and tobaccowentup3.2%inJune2017vs.June2016.

As for the actual retail units, in 2016,Romanian modern food retail networkreached 2,000 stores operated byinternational retailers. During 2016, thelarge retailers present on the Romanianmarket inaugurated about 250 stores,

FoodRetailDevelopmentinRomania–2017International retail chains present onthe Romanian market expand atdouble-digit speed confirming theRomanian consumers' increasingdemand and purchasing power for thelast few years. Romania has been themost dynamic large market in Europe,with a GDP y-t-y growth of between4.8% and 6.1% and a population ofalmost20million.

Purchasing power in Romaniaincreased12%in2016vs.2015whilein2017 Romanian salaries register thehighestgrowthinEurope.

According to the National Institute ofStatistics, the retail sales of food,beverages and tobacco in Romania haveincreasedby13.7%in2016comparedto2015, while in the first seven months of2017, itgrewwith6.6%comparedtothesameperiodin2016.

StartingwithJune2015,theVATforfoodand non-alcoholic beverages in Romaniahas been reduced from 24% to 9%. Thisgovernment measure has had a positiveimpact on the food retail sector inRomania.

with almost 20% more new storescompared to 2015. For 2017,international food retailers operating ontheRomanianmarketannouncedplanstoopen a cumulated number of over 300newstores.

According to Monitor International,KauflandRomaniamaintainedthe lead ingrocery retailers in 2016, with a 13%value share. This positionwas the resultof its strength in hypermarkets, with a47%valueshare.

Source: FRD Center, Ministry of Public Finances

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Furthermore, some major local foodproducerswith their own retail networksinRomaniaare:

UnicarmDianaSergiana

OnlinefoodretailsinRomania:

Mostofthefoodretailchainsalsooperateon-linestores.

Examplesare:

www.carrefour-online.rowww.cora.rowww.metro.roCarrefour Romania has launched inNovember 2016 the CarrefourPayapplication - carrefour.ro/pay/ - throughwhich the buyers can pay for theirpurchasesusingmobilephones.

The Internet retail sector in Romaniahasregisteredadynamicgrowthinthepast period due to wideningsmartphone use and offering adiversifiedrangeofproductsatbargainprices.

The on-line food sales are expected torecordagrowingtrendduringthenextyearsinRomania.

RecentM&AandInvestmentActivitiesRegarding M&A, in 2016 two majortransactions were completed:Carrefour acquired Billa and Auchanhas completed the merger byabsorptionwithReal.

Carrefour has acquired the 86 Billastores in Romania from the ReweGroup,inatransactionofEUR97m.Bythe end of 2017, all Billa stores inRomaniaareexpectedtooperateunderthe “Market” banner, which Carrefouroperatesonthesupermarketsegment.

InJanuary2017,MetroGroupsoldtheshares held in Real Hyper MagazineSRL, which operated 4 stores inRomania, to Terazone Enterprises

Limited,localfirmsetupbyexperiencedretailprofessionalsinRomania.

The acquisition ofProfi retail networkby Mid Europa investment fund, atransactionofEUR533mconcludedwithEnterprise Investors, took place onFebruary15th,2017.Withits515storesand over 11,000 employees at the time,Profi is themodern retail network withthe largest geographic expansion inRomania.

MitiskaREIM,aninvestorspecializedinretail parks, has recently announced thesuccessful acquisition of Romanian firmAlphaPropertyDevelopment,amovebywhichtheBelgianbuyerisstrengtheningits operations in Romania. Theacquisition of the Alpha PropertyDevelopment portfolio, consisting of 11retailparksand3developmentprojects,wascarriedouton thebehalfofMITIKAREIM,FirstRetailInternational2(FRI2).

The French group Carrefour currentlyowns 51% of Bringo Magazin SRL, thecompany operating the Bringo on-lineretail platform. In July 2017 Carrefouracquiredits21%fromBetaSoftware.

Trends

TheprivatebrandsectorinRomaniahassignificantly increased in the past years,all the major retailer networks havingdevelopedtheirownfoodprivatebrands.

For the next period, the Romanian foodretail sector is expected to benefit fromsteadier economic growth based on aforecastedrealGDPgrowthrateof5.2%in 2017, the consumer spending risingandthelowinflationrate.

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TheorganicfoodmarketinFrance

Aburgeoningmarket

Focusonwholesalersoforganicproducts

The organic wholesalers market wouldweighmore than€600million inFrance,with fruits& vegetables being one of themain segments. The main players arewholesalerswhichofferarangeoforganicproducts such as the market leaderPomona, Transgourmet or Brake, andspecialized wholesalers such asProNatura,RelaisVertorDynamis.

productscompared75%in2014.

The main product categories whichdrove themarket in 2016were fruits &vegetables with a 33% increasecomparedto2015,grocerieswitha24%growth, and dairy products with a 15%increase.

Themaindistributionchannelsaremass-market retailers (45%) such asCarrefour, Auchan or Casino, organicshops(37%)suchasBiocoop,NaturéoorLa Vie Claire, selling directly from theproducers to the consumers (13%), andlocal craftsmen and traders (5%). ThetwoleadingorganicbrandsinFranceareBiocoop (€768 million of revenue in2015) and Carrefour (€490 million ofrevenuein2015).

Concerning importations and exporta-tions, 71% of the organic products con-sumed in France come from France.Amongthe importedproductshalfcomefrom countries within the EuropeanUnionandtheotherhalffromtherestofthe world. The importations aregenerallyexoticproducts(banana,coffee,cacao, etc.) or Mediterranean products(olives,citruses,etc.).

Finally, the exportations increased by14% in 2016 (€ 629 million) amongwhichwinesaccountedfortwo-thirds.

Afteranexcellent2015whichsawthemar-ketincreaseby14.5%toreach€5.5billion,theorganic foodmarketagain increasedinFrance by 21.7% in 2016 to reach €6.7billion(excludingout-of-home catering).Ifweconsidertheout-of-homecatering,themarket stands at €7.1 billion, withcollective and commercial cateringrepresenting €229 million (a 5% increasecompared to 2015) and €182 million (anincrease of 10%) respectively. As of 2020,the market could reach €8.9 billionaccording to the forecasts. Despite thisstronggrowth, themarketremainsanichemarket,representing3.2%ofthetotalfoodmarketinFrance.

In 2016, the biological activity involvednearly118,000directjobs(an8.4%growthper year). Moreover, in terms of arablelands, 1,538,047 hectareswere committedto this kind of agriculture, a 17% increasecomparedto2015).

Keytrends

This strong growth in the organic foodmarket can be explainedby the increasingattractiveness of organic products due tomotivations related to ecology and health.Indeed, 89% of French people todaydeclarethemselvesconsumersoforganic

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Western food industry benefit from Asians demand of higherquality

For various reasons, Asia has a growingdemand for quality food, which benefitsWestern companies. The volume ofdemandstemsespeciallyfromChinasvastand fast growinguppermiddle class,whohave the capability to spend, and are notsatisfiedwithanoftenpoorqualityinlocalfood.

Western food companies benefit from itsmanyyearswithhighqualitystandardsinfood production, which is based upon asolidtraditionoftraceability,transparencyandsustainability.

Thishasledtoincreasedexportfromwesttoeast,whichgivesgreatopportunitiestoestablish partnerships with local foodproduction partners in Asia. This couldsecure higher quality food productionstandardslocallyandmaturethemarketinmanyways.

An example of increased export is theDanish/Swedish dairy Arla, which is thelargest manufacturer of organic milkproducts in the world. Arla has a largeexport ofmilk products to China and hasrecently announced, that it intends toexpand to become the largest provider oforganic milk products to the Middle EastandNorthernAfrica.

Furthermore, Arla and Danish authoritiesare partnering with Chinese dairies andlocal partners in various areas such astraining Chinese inspectors in securingbetterfoodsafety.

Another example of a new partnership isDanish Crown, the world’s largest porkexporter,whohas recently established anagreementwithAlibaba,thegiantChinesee-commerce company. The deal is aboutselling pork online to Chinese consumers,whichrepresenttheprobablylargest-andfastestgrowing-porkmarketintheworld.Alibaba averages 466 million users per

year.

Key food and drink trends inAsia

According to the global marketintelligence agencyMintel, there are fourkeyfoodanddrinktrendsinAsiaPacific:

1.Healthieralternatives

AccordingtoMintel, the firstkeytrend isabout consumers trying both be morephysicallyactiveand toeathealthierandexploring a lot of alternative healthproducts, as many consumers nowrecognizethebalancingactofachievingahealthydiet.Fromaproductperspective,there is a clear increase in vegan orvegetarian claims in the last five years.Bakery,snacks,saucesandseasoningsareemergingspacesforproductinnovationinthisarea.

Example: As several Asian countries areexperiencing growing problem withobesity and diabetes, Coca-Cola, Nestléand PepsiCo and four other beveragemanufacturers have recently signed apledge committing to reduce the amountof sugar across their soft drink productrangessold inSingapore–to12percentor lowerby2020.Thismoveemphasizesefforts taken by industry players toprovide consumers with healthier foodoptionsandencouragehealthierlifestyles.

2.Brandstory

The second key trend, called based on atrue story, is a starting point and wherethe concept of "craft," "handmade" and"handcrafted" are picking up. Honestcommunication about a product alsoinvolves using technological innovationsuchasQRcodeswhichcarryinformationabout the origin, ingredients and theprocesses that went with it. Bigmanufacturers can take a cue from the

“think small” mentality and use that intermsofdevisingsomestrategiesonhowtogivethatstorytoconsumers.

3.Visualeating

While flavourhas longbeen the focusofinnovation, currently, eating is all abouthowthefoodlooks.Consumersaremoreactive on socialmedia and food is oftenthe central element of posts, drivingcreativityatrestaurantsandathomethatbrands can tap into or drive. From amanufacturer'sperspective,thereisalotof innovation happening with colour,shapeandtheelementofplayfulnessinaproduct, which is something thatconsumerswant.

4.Changinglifestyles

More consumers are living in single-personhouseholdsoroccasionallyeatingmealsalone.Thesemealsforonerequireright-sizedproductsandpackaging.Also,the ageing population is also rapidlygrowing in Asia. Factors to considerwhen targeting one-person householdsand ageing consumers are nutritionalneeds, price convenience and portionsize.

Anotherlifestylechangeisthegrowthofonline shopping, applications and on-demand delivery services that aretransformingconsumers’accesstodeals,niche foodanddrinkproducts,andevenfull meals. With Internet penetrationgrowing in South-East Asia, thedevelopment of new solutions within e-commerceisbuilding.Physicalstorescanalso experiment with online ordering,subscriptions or delivery, offering loyalcustomers convenience withoutsacrificing loyalty. E-revolution such asonlineshopping isgoingtogrowfurtherin the next few years despite a slowergrowthcurveinAsiacomparedtowhatisseeninWesternmarkets.

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Disruption in the global foodindustry

Technologyisdrivingpervasivedisruptionin many industries, including food &beverage,wherechangeistakingplaceonmany fronts – from production,distribution all the way to retail andconsumption.

As such, there is an important need forfood businesses to take into greaterconsiderationtheevolvingenvironmenttodevise appropriate strategies for thefuture; why and how things aretransforming, and how it might affectthem.

Thus,accordingtoPwC,foodandbeveragecompanies should be aware of followingkeyindustrytrends:

1.Globalisation

As the world is more connected today,global megatrends - such as climatechange, urbanization, digitization anddemographic change are transformingsociety and thewaywe do business. In aworld without borders, staying on-top ofissues means being able to adapt faster.Globalisation is also making food supplychainsmorecomplexthaneverbefore.

2.Foodsecurity

The security of food supply is beingchallenged. Price spikes, availability offood and the integrity of supply are aconcern as global food demand grows.Solutions will continue to be linked totrade, regulation, technology,

infrastructureand increasedcollaborationbetweenthepublicandprivatesectors.

3.Scandals

Fake food, contamination, safety andqualityfailures,ethicalandenvironmentalconcerns cost money and damage trust.Bad news travels fast, and will quicklyinfluence today's social media addictedconsumers. The scrutiny on your foodsupply chain and focus on brand valuegoesalongwayinprotectingthebrand.

4.RulesandRegulations

Regulations are increasing worldwidefromgovernments and industrybodies asthey respond to the surge in supply chainfailures - butwhat is notable is that foodcompaniesaregoingbeyondcompliancetowintrust.

5.Differentiation

Foodtrustisnotaboutplayingdefensebutoffence. During a rapidly disruptedmarketplace, opportunities are abounded.Food companies must seize theseopportunities to not only differentiatethemselves from their competitors. It iskeytocommunicatetoconsumersthatyouareattheforefrontofthechange.

6.Investment

Big food companies are investingmillionsin integrating and purchasing wholesupply chains to improve oversight,controlandintegrity.

7.Technology

We are now equipped with smartertechnology to manage data from farm tofork. This can help improve supply chaintraceability and transparency, which is attheheartofbuildingtrustinfood.

8.Economicpower

Consumers in the region are increasinglyaffluent and this growth of maturing

economies is expanding consumermarkets. Closer to home, for instance, istheHalal foodmarket–whereconsumersare now more conscious about foodsource,varietyandquality.

9.Consumers

Disruption from consumers is becomingmore prominent than that of industrycompetitors. Changing taste and growingcustomer expectations will continuedictating the fortunesof foodcompanies -who must meet these demands or risklosingpreference.

10.MillennialsandMobileCommerce

The game is changing - demand fororganic, sustainably sourced, ethicallytraded andhealthy food is rising, spurredby millennials and more consciousconsumers.

Mobile devices are researching andpublishing more tools, as millennialsshoppersaremakingmobilecommerceanonlineshoppingtoolofchoice.

11.Connectivity

The ability for consumers to connectthemselves to more data is empoweringthem. There is a growing trend forconsumers to want direct links to thecompanies that grow and produce theirfood. Companies are collectingmore dataand using it to feed customers with theinformationtheycrave.

12.Keepupthegoodwork

Tosumuptheyear,ithasbeenhearteningto see the industrymature to understandthat food trust goes beyond just foodsafetybutincludesfoodintegrity.Wehaveseen more food and beverage industryplayersputgreatereffortinensuringfoodtrust in their offerings and leveragingopportunities to deliver their brandpromise and continue to build consumertrust.

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Deal Highlights

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TeamLeaderJacquesJettenAeternusTheNetherlandsj.jetten@aeternuscompany.nlwww.aeternuscompany.nl

M&AWorldwideAgri,Food&BeveragesIndustryGroup

Argentina Mario Caramutti [email protected] +54 11 5278 5600

Australia Adrian Ness [email protected] +61 2 8211 0523

Brazil Carlos Parizotto [email protected] +55 11 2050 4050

Denmark Jens Möller [email protected] +45 5135 3622

France Phillippe Delecourt [email protected] +33 1 53 53 59 30

France Isabelle Arnaud-Despréaux [email protected] +33 1 42 65 72 75

Italy Fabrizio Ricci [email protected] +39 02 87 24 25 00

Mexico Miguel Alonzo [email protected] +52 55 5596 5937

Netherlands Jacques Jetten [email protected] +31 0 6 41 66 29 87

Poland Anna Domeredzka [email protected] +0048 22 3195688

Romania Jackie Bojor [email protected] +4021 411 1460

Saudi Arabia Fahad Al Kassim [email protected] +966 1 2911000

South Africa Dirk Meissner [email protected] +27 21 886 8606

UK Jonathan Rich [email protected] +020 3872 4500

USA Bill Battison [email protected] +001 202 470 1972

agri food beverages - industry report october 2017 …...3 developments in agri, food &...

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