Glenn Pappalardo

Here’s yet another shrink-to-grow portfolio move (speculated) in the food space.  If it wasn’t clear before, it is now: big food companies are VERY focused on improving growth and apparently shedding slow-growth anchors is a preferred lever in this environment. This strategy is understandable, because they can control a divestiture more than trying to make an acquisition, or a series of acquisitions.  Of course, they still need a counter-party to do a deal, but this specific business and others that have been announced, discussed or completed (e.g., Kellogg and cereal, Unilever and Ice Cream, General Mills and Yogurt) is big enough that the public markets are always a viable transaction partner. If you needed any more convincing (which you probably don't), the divestiture bandwagon suggests some conviction about future growth levers in the big food c-suite: 1. The pricing window is truly closed.  Pricing has driven topline in the recent past but now organic growth will have to come from other sources – and the only foreseeable catalysts for unit growth are lower pricing (no thank you, apparently) or innovation (see point 2). 2. Innovation confidence is low.  Small food companies are the innovators and growth-makers in this industry.  They are taking share and have been for over a decade.  Apparently the big guys do not expected this to change anytime soon. 3. Portfolio growth exposure = growth reality.  Big food companies are growth-takers.  They grow at the underlying growth rate of their combined geographies and categories – faster growth will come if they can improve this underlying growth exposure. https://lnkd.in/gaNBYeKS

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The non-alcoholic drinks market continues to grow and grow (and mature). Check out recent insights + stats from our friends at Grüvi: March Off Premise Retail Sales: → $48.6M > Identical to February, up 23% YoY → You can see subcategory performance in the chart below. Gruvi predicts: → 30-35% of YoY NA category growth. → 25%+ in off-prem and 50%+ in on-prem. → Premium, high quality craft or import NA beers will capture most of the growth of the NA beer market. → Big bet on NA RTDs to surpass NA wines by end of year. Gruvi has some more great stats in their blog post (link in comments). I’m hearing this same type of growth from members of the Adult Non-Alcoholic Beverage Association (ANBA). There's been some questioning about the growth of the category because of the recent Chapter 11 bankruptcy by non-alc beverage retailer Boisson and the closing of their retail locations. I was going to share some thoughts on this but the Gruvi team summed it up well: “Having served as a supply partner for Boisson, and being intimately familiar with their retail locations, it became apparent that they faced challenges across their retail and e-commerce channels. Boisson positioned itself as the upscale destination for NA beverages, boasting premium locations and a curated assortment. However, despite the overall growth in the NA market, it remains predominantly composed of NA beer (80%) and NA wines/RTDs under $12 (10%). As larger retailers expanded their NA offerings to target the mainstream consumer—the 90% of the market as seen above - Boisson was left with a small addressable market. Unfortunately, the demand proved insufficient for Boisson to sustain its operations.” Andrea Hernández also has a great take on it in her most recent Snaxshot (link in the comments). The adult NA category is maturing. Brands that do not have good business models, have bad product-market, or average quality products will need to adapt or close their doors. And this is not a bad thing. Because what rises out of this are business and products that better serve the consumer. I’m always impressed by the continued release of higher and higher quality NA products, with each raising the bar for the category. And this is great for people looking to moderate or not drink alcohol for whatever reason, and in whatever situation that best suits them. The adult NA category is getting bigger and better each day. And ANBA, our members, and I are here to continue to create a world where everyone has access to great tasting adult non-alcoholic beverages to enjoy in every social situation. And that is something we can all celebrate! 🍾 🥂 🍻 You can join us in growing the category and this movement by visiting ANBA's website and signing up for a soon to launch newsletter (link in comments). And you can follow me, Marcos Salazar 🍺🍷🥃, (& click the bell under my profile banner) to get regular insights and news about NA drinks. ♻️ #Repost if you like this post :-)

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The US Beer industry landscape is changing fast. AB InBev's North America Normalized EBIT declined by over $1.3 B from 2022 to 2023. The volume market share decline (relative to Molson Coors Beverage Company and Constellation Brands) contributed to that EBIT decline by an amount of $400 Million. It has not helped that overall volumes between these three major players has declined by over 4%. It's a general sign of the headwinds facing the beer category as shopper and consumer preferences shift. For #ABInBev, that overall market decline cost them another $200M. A just less than 4% increase in Net Pricing contributed a +ve $560Million to the Normalized EBIT change, but was insufficient to mitigate the increased inflationary unit costs associated with Cost of Sales and the de-leveraging of other SG&A operating expenses. It will be interesting to track how these components of EBIT will change for 2024, given growth constraints associated with market share gains and price increase ceilings. Looks like some drastic OPEX cuts might be the only short-term remedy for now as AB InBev looks to rebuild brand equity and volume share. Send me a DM or write "send" in the comments section and I will forward you the document that also contains the related MVA operating breakdown for #MolsonCoors and #ConstellationBrands. It's interesting to see how and to what extent Molson Coors and Constellation Brands benefited from AB InBev's headwinds. You will also see why Constellation Brands might be the longer term winner here. #Beerindustry #beercategory #beerdistribution #Heineken #BeverageAlcohol #Asahi #Carlsberg #BostonBeer #beer #beverages #BudLight #MillerLite #CoorsLight #Corona #ModeloEspecial

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After spiking during the pandemic, profit margins and same-store sales growth have fallen back to pre-pandemic levels for the grocery industry, FMI — The Food Industry Association said in a report released last week. Only 38% of surveyed food retailers said they expect their same-store sales to grow in 2024 while just 13% predict net profits will increase, according to the trade group’s The Food Retailing Industry Speaks 2024 report. Food retailers are focusing on improving cost controls and cutting unnecessary expenses that do not drive value, FMI found. In 2023, profit margins in the grocery industry hit 1.6% — the lowest level since it was 1% in 2019 — as total expenses increased, FMI found. The industry’s slowed same-store sales growth of 2.1% last year was driven by inflation.

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Constellation Brands Inc. saw its stock climb during premarket trading on Thursday following an upward revision of its adjusted fiscal 2025 profit forecast, surpassing analyst predictions. The company also reported a robust fourth-quarter profit, driven by the stronger-than-anticipated performance of its beer division. CEO Bill Newlands highlighted the beer business's consistent volume growth over 56 quarters, coupled with impressive margins, although wine and spirits sales experienced a decline. https://lnkd.in/ggNU_G9r Constellation Brands Bill Newlands Branded Hospitality Ventures #Technology #Business #Innovation #AI #investing #venturecapital MarketWatch

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Functional beverage is the fastest-growing category in grocery—but it’s also the least forgiving: https://okt.to/9BhacA “In a category as crowded and volatile as functional beverage, you’ll quickly see that the competitive forces are extraordinarily intense,” says LPK’s Chief Growth Officer, Jesse McMullin, a multi-hyphenate in functional beverage who has led the development and branding of over 140 on-shelf CPG products in his career. “The key to understanding these forces—and to maintaining a competitive advantage—lies in being self-aware about your brand and your business dependencies.” In our latest piece on lpk.com, McMullin gives guidance on navigating the complexities from seed to shelf: https://okt.to/sWZB1F #functionalbeverage #bevtrends #cpg #brandgrowth

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In 2024, energy drink sales in convenience stores are expected to remain robust despite anticipated price hikes. Sales surged 10.8% in the past year, with smaller brands like CELSIUS Holdings, Inc. and GHOST leading growth. These brands are forecasted to continue expanding shelf space significantly. C-store operators are preparing for higher prices by focusing on variety, promotional deals, and flexible sizing to maintain customer interest. Brands emphasizing functional and low-sugar claims are particularly popular, catering to consumer demand for health-focused beverages. Overall, while inflation poses challenges, the energy drink market in c-stores is poised for continued growth through strategic marketing and product innovation. Read More Here: https://lnkd.in/e84H9Bbn C-Store Dive Branded Hospitality Ventures Sally Lyons Wyatt #hospitality #beverage #foodandbeverage #technology #innovation Joe Sobolewski Paul Storey John Fieldly Giancarlo Morena Jarrod Langhans Toby David Mark Magnesen Ryan Hughes

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Elaine Watson and AFN, thanks for the article on Mattson: Innovation for the Food & Beverage Industry

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Beverage brands—learn what top acquirers like Coca Cola are buying through their corporate transcripts   Coca Cola executive management openly share 3 key themes in how they're thinking about the brand portfolio at the CAGNY consumer conference in February '24:   1. There's still ammo to acquire 💲   --- Coca Cola plans to increase investments into its brand portfolio in 2024 up to $2.2 billion.   --- The company still sits well below its net debt leverage target of 2.5x (1.7x in 2023) => access and appetite to acquire more brands.   --- It's clear from their concurrent divesture of bottling plants that they want to double down on the asset-lite approach with brands. 2. Focus on buying fewer, more scalable brands 📈   --- The company is turning away from buying smaller brands to only fit 1 or 2 markets.   --- Management is making sure "inorganic plays have got a higher probability for a scalable impact" so that its cost base is more efficient. 3. Keep betting on sparkling beverages 🥤   --- The CEO, James Quincy, continues to stay excited about sparkling beverages and has bets across all the subcategories like caffeinated, zero sugar, and all forms of flavors.   --- He sees strong growth continuing without much in the way to stop it. Comment about a beverage category you're particularly excited about!

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Reflecting on this monumental moment, I wanted to wait until the news was "official" before sharing my thoughts and feelings... Almost 7 years ago, a good friend now who started as a good client invited me to his new office in NJ to explore a plant-based protein company he was considering acquiring. That's when I first encountered OWYN. Honestly, I wasn't sure what to make of it initially. Plant-based, vegan protein drinks weren't in my usual "repertoire" of ideation and marketing. But after trying the product that day, I knew I wanted to be part of the journey. And what an incredible journey it has been! Throughout the last 7 years, in my capacity as a "strategic advisor," I've embraced a multitude of roles and responsibilities, working closely with a diverse array of talented leaders. From individuals who made significant contributions from the outset and have since moved on, to those who have ascended to leadership positions, such as CEO Mark O. and Chief Sales Officer Matt OConnell, as well as "more recent" additions like CMO Julia Perez, who came in and made an immediate and substantial impact, our collaboration has been characterized by passion, mutual respect, and an unwavering commitment to innovation. Now, fast forward to today. After countless hours of strategic discussions, meetings, and partnerships, we've achieved something remarkable. We've taken a niche brand, crafted with the finest ingredients, and found the perfect successor in our recent acquisition. If you notice, even as a "consultant" I always will refer to it as we. When I work with brands, especially from day 1, I consider myself a true part of the team. Being part of a brand from inception to this pivotal moment is incredibly special. As a matter of fact, it's been a huge goal of mine since that fateful day 7 years ago. I'm eager to see what lies ahead for OWYN and hopeful that I can continue contributing to a product and brand that means so much to me and countless others, especially our consumers. #OWYN #PlantBased #Acquisition #Journey #Gratitude #Business #CPG #SimplyGood https://lnkd.in/emY6UT2g

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CPG Panel — “More than commerce”: 🔥 We are working on a mega panel (June 13) of CPG powerhouses right now including some of my great friends: Jamie Schwab (Colgate-Palmolive) Jamie Decker (Del Monte Foods, Inc.). We will be diving into the importance of driving direct-to-customer engagement through digital, not just commerce. Topics: (4) 1. First-party data strategies 2. Customer engagement 3. Omnichannel marketing 4. No doubt AI! We still have a few panelists spots remaining, feel free send me a DM or comment below if you may be interested or know some who would be great for this topic. #ecommerce #digital #omnichannel #strategy #cmo #cdo #ceo #cro #leadership #retailecommerceclub #cpg #privateequity #playtowin

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A couple of months ago, I joined the Forbes Business Council. Earlier today, they published an article I put together on the difference between Innovation and Renovation. This confusion, or, as I think about it, the dilution of the intended impact of innovation, is further fueling this topic I have been speaking and writing about, which I call the "Innovation Gap." #CPG #Innovation #CPGindustry #Forbes #ForbesBusiness

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Ep.2 of The Executive Formula Podcast: Growing an executive #career in #consumer goods industries? Differences between working for public, family owned and private equity backed companies. These are some of the topics we discussed with Rob Maneson in Episode 2 of "The Executive Formula", the new #podcast by ACCUR Recruiting Services | Executive Search for Consumer Industries. Click to watch or listen to the full episode on the platform of your choice (Youtube, Spotify, Apple Podcast...): https://lnkd.in/eFZ_s9_4 CHAPTERS: 0:00 – Podcast Introduction 1:31 – Not Talking Tobacco But CPG Industry 5:25 – Tobacco Employers Are Usually Better 7:49 – Working for Private Companies vs PE-Backed Companies 9:01 – Experience Needed To Work For PE-Backed Companies 14:11 – Large Employers Open More Doors 17:45 – Growing Ambition 21:42 – Opening New Business vs Managing Existing Business 29:48 – Why Staying In The Tobacco Industry 33:33 – Conclusion #ExecutiveFormula #ExecutiveSearch #ExecutiveCareer #Leadership #ConsumerGoods #TobaccoIndustry #PrivateEquity

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The moderation trend is continuing to accelerate! The NA segment of on-premise beer sales in the U.S. jumped 33.7% over the last 52 weeks with broad-based gains in all 50 states! 💪 📈 🍻 At Partake Brewing we are seeing on-premise operators move from offering 1 NA beer option to now several with macros and craft represented in addition to house mocktails. 🍺 🍷 🍹 This is an exciting time for the non-drinker and moderator alike! Gone are the days of water, juice, milk, and soda as the non-alcoholic options. 🤩 https://lnkd.in/gibbdbPB

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Customer-centric (customer-centered, customer first) was a corporate buzzword that littered mission statements, marketing slicks, slogans, emails, etc., but lost its impact due to corporations' repeated failures to deliver on the promise. I fear the same fate for "Innovation," which is used everywhere but seldom delivered consistently. The "Innovation Gap" discussed in Adam Melonas article published by Forbes Business Council below must be solved before "Innovation" becomes another hollow buzzword. Innovation, not Renovation, is what will drive profitable, volume-led growth for CPG companies. Critically, the innovation, from idea to shelf, must be in months, not years.

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#FMCG companies aim to divest their way to growth Divesture value has been exceeding acquisitions value for the world largest #CPG players since 2023, and it is likely to continue considering recent announcements (Unilever Ice Cream) & on-going rumors (Kraft Heinz & Oscar Mayer...) Few reasons for this: 1) Pressure is on to get back to mid-term guidance on top-line which is often hard in a post price increase context (>50% of the top 50 listed FMCG companies missed their topline guidance in Q4 2023) while recovering pre-COVID profitability (at end 2023 >70% failed to do so) 2) Divesture is often the fastest/ easiest way to improve organic growth & profitability footprint especially when companies have a large business with much lower growth, much lower profitability & that comes with limited di-synergies in case of carve-out 3) If leverage level for the top 50 FMCG companies is on average at an acceptable level (x2.7 at end 2023 vs. the generally accepted x3 level), some FMCG companies exceeds the threshold (AB InBev, Kraft Heinz, Nestlé, Mondelēz, General Mills, Danone, HEINEKEN, Asahi, CCEP...) 4) At a time top-line growth is becoming tougher, shares buy-backs are increasingly leveraged to drive EPS growth. So the proceeds of divesture can really help there especially for the companies with the most constrained B/S 5) Finally, high ROI M&A remain scarce because of the rarity of quality (mid-size, same categories than acquirer's, strong growth track record, complementary to acquirer's portfolio, scalable growth model that could benefit from GTM synergies) & well-priced assets PE funds & public markets (thru IPOs) will be most often the exit scenarios for those divestures. If large FMCG carve-out assets can sometimes deliver better results under (partial) private ownership (cf. Froneri), not all end up being a success. So caution prevails Exciting times ahead on divesture and M&A front in the FMCG industry in 2024 To read our full perspective: FMCG CEOs: M&A Q1 2024 In Review - A New Bottom & Four Reinforcing Trends 𝗟𝗶𝗻𝗸 𝘁𝗼 𝘁𝗵𝗲 𝗳𝘂𝗹𝗹 𝗽𝘂𝗯𝗹𝗶𝗰𝗮𝘁𝗶𝗼𝗻: https://lnkd.in/efD5RNWX 𝗧𝗼 𝗴𝗲𝘁 𝘁𝗵𝗲 𝗰𝗼𝗿𝗿𝗲𝘀𝗽𝗼𝗻𝗱𝗶𝗻𝗴 𝗱𝗲𝗰𝗸, 𝗽𝗹 𝗹𝗲𝗮𝘃𝗲 𝘆𝗼𝘂𝗿 𝗻𝗮𝗺𝗲 𝗶𝗻 𝗰𝗼𝗺𝗺𝗲𝗻𝘁 𝗧𝗼 𝗴𝗲𝘁 𝗮𝗹𝗹 𝗼𝘂𝗿 𝗶𝗻𝘀𝗶𝗴𝗵𝘁𝘀, 𝗳𝗼𝗹𝗹𝗼𝘄 𝘂𝘀/ 𝘀𝘂𝗯𝘀𝗰𝗿𝗶𝗯𝗲 𝘁𝗼 𝗼𝘂𝗿 𝗙𝗠𝗖𝗚 𝗖𝗘𝗢𝘀 𝗜𝗻𝘀𝗶𝗴𝗵𝘁𝘀 𝗻𝗲𝘄𝘀𝗹𝗲𝘁𝘁𝗲𝗿: https://lnkd.in/ea4gy65y #strategy #mergersandacquisitions Frederic Fernandez & Associates

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https://lnkd.in/gqwkqA3N Members of Generation Z (born between 1997-2012), for example, more often buy crackers, processed cheese and popcorn and less often purchase cage-free eggs, seafood and beef sausage. Millennials (1981-1996) go for bagged snacks, baked bread, fluid milk products, natural cheese and bananas and not so much for dry sauces and gravy, South American foods and frozen juices from natural ingredients. Generation X (1965-1980) also purchase bagged snacks, baked bread, milk and natural cheese, plus soft drinks, and they buy fewer of the same products millennials do. Baby boomers (1946-1964) echo the younger generations’ preference for milk, breads, bagged snacks, bananas and natural cheese, while they’re less often buying cider, frozen meat and seafood and refrigerated dough made with natural ingredients. One common thread is avoiding sugar. This is where Icon Foods plays a role with our sweeteners, sweetening systems, fibers, modulators, and inclusions, all designed to make deep #clean cuts to #addedsugar

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