Consumers are increasingly interested in “better-for-you” beverages, moving away from drinks with high calories, alcohol, sugar, and gluten. This dynamic has led to strong growth in sparkling waters and beverages across the functional (non-alc) category. Similarly, in the alcohol segment, this trend has fueled growth in seltzers, low and no-alc beer, hard kombuchas, and wine spritzers. Large beverage suppliers are taking note and have made significant investments to enter these new categories through both in-house innovation and acquisition.
While the COVID-19 pandemic has benefited many beverage brands that are distributed in the grocery and e-commerce channels, most alcohol suppliers have been negatively impacted due to the extended shutdown of the on-premise channel (bars, restaurants, tasting rooms). The current environment has led to a near-term slowdown in transaction activity, but we do expect this to improve in the second half of 2020 as strategics re-focus on their investment and acquisition strategies and the pipeline builds for those needing capital or a strategic partner for their next phase of growth.
The lines are blurring between beverage categories. Non-alcohol suppliers, who were traditionally focused on CSDs, are increasing investment in “better-for-you” categories, and many of the traditional beer suppliers, including AB-InBev and Molson Coors, are investing in new categories including non-alcohol, seltzers, wine, and other “near beer” segments.
From a supply chain perspective, co-manufacturers are increasing capacity for “better-for-you” products, and we have also seen purchases of struggling craft breweries by buyers looking to shift capacity to new products including hard kombucha, seltzers, and cannabis beverages. There is strong interest in the manufacturing and equipment sector from both strategic and private equity buyers, who see the upside to investing in the broader trends driving today’s beverage market, without having to rely upon the success of a single brand and pay the typically high revenue multiples associated with doing so.
What’s Your Why?
My best memories are often around a table, filled with laughs, my favorite people, and fantastic food and beverages. The ability to work with companies and brands that touch this experience in many different ways makes my job incredibly rewarding. Being focused across the beverage ecosystem, from the supply chain to the consumer, allows us to provide unique insights, nuanced guidance and superior advice which enables us to position our clients to find the best-suited partner and achieve outcomes that meet or exceed their expectations.
About Nicole Nugent Fry, Managing Director, Food, Beverage & Agribusiness
Nicole has over 20 years of investment banking and corporate development experience. She has an extensive background providing financial advisory services to middle market companies, including mergers and acquisition transactions, debt and equity capital raising, valuations, and restructurings with a special focus on the beverage segment. Read Nicole’s full bio here.