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Big appetite for M&A between European and US food and drink companies

Persistent tariffs on EU food and beverage exports have helped drive record levels of M&A activity between European and US companies this year, according to analysis by ING.

“EU food and beverage exporters are reconsidering their approach to the US market as tariffs and the weaker dollar bite,” wrote Thijs Geijer and Kiran Sanchit, senior sector economist for food and agri and EMEA head of food and agri respectively, at the Dutch finance institution.

Currently, “it makes more sense to have local production in North America to reduce the impact”, they added in the November update.

In the first half of the year, deal activity slowed as tariffs made companies wary and added extra costs and time to complete negotiations. What followed, however, was a “blockbuster summer”, wrote Geijer and Sanchit.

Indeed, there were several billion- euro deals in various categories: Ferrero and WK Kellogg in breakfast cereals, and Simplot and Clarebout in potato products, for example. The Keurig Dr Pepper and JDE Peet deal in beverages helped push the year-to-date value for transatlantic mergers and acquisitions (M&A) to a record high of almost €25 billion.

There is more to come, the experts predicted, as companies look to manage risk from geopolitical tensions, macroeconomic trends and policy shifts. Potential divestments of Nestlé’s global water division and DSM-Firmenich’s animal nutrition and health business are pending.

A KPMG survey focused on companies’ M&A plans published in August showed that two in five (40%) dealmakers are planning more deals or to bring deals forward. Over two-thirds (68%) of consumer and retail companies expect to be more active this year compared to last, the consultancy found.

Categories to watch

ING’s experts said there are several categories to watch in the coming months. Within EU to US deals, private label is certainly one, Geijer told Ingredients Network.

“This was highlighted [in November] by acquisitions from Spanish-based food manufacturer Cerealto [of Fresca Foods in the US] and European buyout firm Investindustrial [which bought private-label food manufacturer Treehouse foods],” he explained.

Strong food price inflation has also boosted demand for private-label products from retailers including Aldi.

Geijer also expects “more interest from EU to US in categories like beer, wine, chocolate, coffee, and potato products, given that these are all key export products which are at a competitive disadvantage to products that are made in the US”.

ING’s paper also highlighted that while EU companies are “mulling their options” in the US, American companies are “clearly making their presence felt” in the European market. The deals between Simplot and Clarebout and Keurig Dr Pepper and JDE Peet’s show that US companies can acquire some of the largest EU food and beverage companies when they see a strategic fit, the experts noted.

Tariffs, rate cuts, and the stronger euro are factors pushing European companies to assess their position in the US market. Large European food companies that are considering divesting business units or selling the company outright, may well see American strategic buyers and private equity firms as likely candidates, they explained.

The US-EU trade deal also looks set to stimulate US food and agriculture exports to the EU given that it includes the intention to provide preferential market access for US products such as fish, corn, soybean oil, and nuts into the European Union.

“While that could reduce the need for US corporates in these subsectors to look for processing assets in Europe, they might be in the market for more distribution capacity,” Geijer and Sanchit wrote.

With a provisional EU-US trade deal in place and no big elections planned on both sides of the

Atlantic, this could be the start of a “period of relative calm. Deals that can be executed quickly and integrated easily, of course, have the advantage and 2025 has proven that the market can rapidly shift and adapt”, they added.

“Our teams are currently engaged in several high-profile deals,” said Sanchit. “It is a mixed bag of European companies looking for opportunities in the North American and Asian market, while the other way around we see US companies actively acquiring European assets.”