Posted by: Mahdi Ebrahimi | November 11, 2007

Hain, Dean, Nestle, among large food companies likely to acquire organic and all-natural beef companies as industry consolidates

Industry experts interviewed by mergermarket expect private equity interest and M&A activity in the organic and all natural meat sector to increase as consumers’ interest in all-natural and organic products gains momentum.

The organic meat industry is growing rapidly in response to increasing rates of obesity and food allergies. Many companies are experiencing a growth rate of at least 20% a year, analysts and industry executives said. The growth rate, in turn, has elevated private equity interest as well as M&A interest from large organic and natural meat players that are building through roll ups. Large players in the organic and all-natural beef industry are becoming attractive targets themselves, and may be acquired by larger food companies, industry players predict.

“There are not a lot of large, independent food companies out there so you will see private equity make investments in those companies and they will either become public or be consolidation candidates in the next couple of years,” an industry analyst said.

Within the past six months private, Colorado-based Coleman Natural Foods merged with BC Natural Foods and listed, New York-based Hain Celestial acquired New York-based Plainville Farms, a family owned, all-natural turkey company. These moves indicate the beginning of a consolidation trend that is likely to continue over the next couple of years, an industry analyst said.

Hain is likely to acquire an organic or natural beef company next as a natural brand extension, the analyst said. An industry executive in the meat industry said that companies in the USD 30m-100m range would most likely be targets. Plainville Farms generated approximately USD 30m in 2006 sales, according to a Hain Celestial press release.

Many other industry executives agree believe that Hain Celestial will not be the only larger food company interested in making acquisitions in organic and all-natural meat. Industry players say Dean Foods, Nestle and Heinz may also be considering acquisitions.

“Organic is not a fad,” Mack Graves of Panorama Meats said. “Organic is just starting to grow and you will see more of the big guys dabbling in it.”

“They are all looking at it and they are determining what the next big thing down the road is. The big four packers [Cargill, ConAgra, Farmland National, and Tyson Foods] are even discerning when they should jump, and all of them are going to have to pick up the smaller companies because they are never going to be the initiator of it,” CEO Allen Williams of Tallgrass Beef said.

Organic and all-natural beef companies are already attractive targets for private equity groups and large food companies, said CEO Stephen McDonnell of privately held New Jersey-based Applegate Farms, an all-natural and organic meat company with revenues between USD 50m-100m. McDonnell, said he is not interested in selling at the moment, but has been approached.

“Everyone in the space has been approached. We are at an early phase of growth, but it is high growth, so there are a lot of strategic acquisitions going on,” he said. “The food shows are now drenched in private equity or larger companies are looking at rolling up smaller businesses.”

Maverick Ranch, a privately held Denver, Colorado-based meat company, is looking to do just that, according to owner Roy Moore. The all-natural and organic beef, pork, buffalo, lamb, chicken, and turkey processor and distributor has revenues of USD 120m and is seeking investment to acquire four or five natural and organic meat companies. Maverick Ranch is targeting businesses with sales of USD 30m-100m. “We would like to do a rollup in the field. We are already doing business with these companies. They are partners,” Moore said.

Colorado-based Coleman Natural Foods could also consider rolling up the organic and all-natural beef industry, according to an industry executive. Coleman is one of the largest all-natural and organic meat companies with 2007 sales of USD 672m, according to Hoovers. Coleman declined to comment.

Future targets for Maverick and Coleman could include Kansas-based Tallgrass Beef, which has revenues of USD 10m or California-based Panorama Meats, which has USD 8m-10m in annual revenues. Both company owners said that although they are open to investment, they are not actively looking to sell right now.

“I think a sale is a year and a half out,” Mack Graves of Panorama Meats said.

“We have been approached two or three times about a few months ago, but we are not building the company to sell it at the moment,” Allen Williams of Tallgrass Beef said.

Larger meat distributors that carry all-meat products such as Coleman Natural Foods and Maverick Ranch could be attractive targets for larger food companies, an industry analyst said.

Moore said his company is approached “all the time” and will most likely sell to a larger food company in the future. “Most likely a bigger food company would be a better partner,” he said. Maverick Ranch competes with Coleman Natural Foods and California-based Niman Ranch.

The industry analyst said that companies in the USD 10m-15m range may be acquired for low teen EBITDA multiples. While an industry executive said meat companies usually sell for 15x or 20x earnings.




  1. […] Mahdi Ebrahimi wrote an engrossing place today onHere’s a hurried excerptIndustry experts interviewed by mergermarket wait clannish justness welfare and M&A state in the nonsynthetic and every uncolored meat facet to process as consumers’ welfare in all-natural and nonsynthetic products gains momentum. … […]

  2. I think that organic and natural ways are only going to become lost again due to big buisness profit. I mean have we learned nothing? The small companys need to stay small and make their products more easily available to the communities nearest them.

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