食品和饮料制造业更新-2023年下半年

Food & BeverageManufacturing IndustryUpdate – 2H 2023 Cascadia Food and BeverageManufacturing Practice Overview Practice Overview CascadiaCapital maintains a leading middle market food and beverage contract manufacturingadvisory practice, grounded in its deep familiarity with industry dynamics, understanding of value drivingand constraining factors within business models, and active relationships across the buyer landscape,all honed over historical and current transaction experience. Principal Sub-Sector Focus Contract, Private Label, and Foodservice Manufacturing for: Erik EinwalterManaging DirectorFood, Beverage and Agribusinesseeinwalter@cascadiacapital.com(206) 436-2538 –Coffee Roasting and Packaging–Vitamins, Minerals and Supplements–Other Goods –Alcoholic and Non-Alcoholic Beverage–Solid Foods (Snacks, Baked Goods, etc.)–Liquid Foods (Soups, Sauces, Condiments, etc.) Recent Cascadia Food, Beverage & Agriculture Transactions Ryder Thomas Vice PresidentFood, Beverage and Agribusinessrthomas@cascadiacapital.com(206) 436-2582 Section I Food & BeverageManufacturing Industry Update Executive Summary – Second Half 2023 Update The major shock of COVID defined 2020 for food and beverage production businesses, and managing through the subsequenthyperinflation, labor challenges, and supply chain challenges shaped 2021 and 2022. However, 2023 hasn’t had the samedefining shock, but rather has been a year of natural industry evolution and maturation, which has come with its own uniquechallenges and opportunities by vertical that require more strategic thoughtfulness and intentionality than ever to ensureoperating success and optimized valuation in the market Era of Large-Scale “Legacy”Brands Owned by Food andBeverage Conglomerates The Impact of COVIDand the Emergence of“A” Assets The Rise of ChallengerBrands DrivingCo-Man Growth Post-COVIDEnvironment Pre-2010 2020 – 2022 2010 – 2020 2023 Through the ~2010 – 2020 era, wesaw the rise of challenger brandsthroughout the food and beveragelandscape driving growth and takingshare, driving the precipitous growthof the contract manufacturers theyutilized as outsourced productionpartners. Contract manufacturingacross nearly all food and beverageverticals evolved from a sleepysegment, to high growth, hotbusinesses serving rapid growthbrands with seemingly endlessopportunities to invest in nearlyguaranteed quick payback growthcapex. Food manufacturing businessmultiples, led by contractmanufacturers, broadly expanded tohigh single digit to low double digitEBITDA multiples 2020 – 2022 was defined by COVID,inflation, labor challenges, andsupply chain challenges. At the startof COVID, demand rose asconsumers overstocked on goodscausing supplier performance toreach all time highs. This increase inoutput caused labor constraints, assuppliers sought to keep up with thedemand surge. Over time, supplychains weakened causing inflationand a rise in input costs that quicklyeroded supplier profits. “A” assetswere able to raise prices to rightsizeprofit, positioning themselvesfavorably in the eyes of investors vs.“B” assets who were not able tomove as quickly. This caused agreater standard deviation invaluation across these two asset tiers In the pre-2010 era, the food andbeverage landscape was primarilydominated by a short list of large-scale “legacy” brands owned by aconsolidated set of large food andbeverage conglomerates who tendedto own their own manufacturing. Thecontract, private label, andfoodservice manufacturers wereoften viewed as sleepier, lowergrowth industrial manufacturingbusinesses and valued as such – inthe mid / upper mid single digitEBITDA multiple range In 2023, input costs have abatedwhile market prices remain constantcausing margin expansion. Howeverdue to de-stocking across groceryshelves and in consumer pantries,contracting demand has decreased.Demand is expected to stabilize topre-COVID levels in 2024. Webelieve suppliers who can (1)understand the demand and supplylandscape in their vertical, (2)understand and minimize the risk ofcustomer insourcing, and (3) buildmulti-channel (co-man, private label,and foodservice) go-to-marketstrategies will be best positioned.Being intentional and strategic onbeing positioned appropriately onthese themes are key to operatorsbuilding best-in-class businessesgarnering best-in-class valuations Supply and Demand Balances are Evolving While during the emerging growth era seemingly all contract manufacturing verticals had demand that outstripped supply /capacity, as the industry evolves and matures, each vertical is evolving in its own way. Having a good grasp of the supply anddemand balances not just within a broader vertical or product category, but of a business’ specific capabilities is critical tounderstanding your company’s competitive positioning and the ability to make prudent, value creating investments Understanding industry supply / capacity and demand dynamics and how they are expected toevolv