February 22, 2017

Canadian meat company, Maple Leaf Foods has agreed to acquire U.S.-based, plant-based protein food manufacturer, LightLife Foods Inc. from Brynwood Partners VI LP for $140 million plus associated costs.

Headquartered in Mississauga, Ontario, Maple Leaf is a focused consumer packaged meats company that is organized into two groups – its Meat Products Group and Agribusiness Group, through which it raises and processes hogs, and sells its range of meat products primarily on the Canadian, U.S., Mexican, and Japanese markets.

This deal is expected to broaden the company’s portfolio beyond its sustainable meat platform, giving it access to the rapidly growing plant-based protein sector. The U.S. plant-based proteins market is estimated to be worth $600 million with the refrigerated sub-category worth $110 million, while posting growth in the double digits, according to the company.

“Expanding into the fast-growing plant-based proteins market is one of Maple Leaf’s strategic growth platforms and supports our commitment to become a leader in sustainability,” said Michael McCain, president and CEO of Maple Leaf. “Consumers are increasingly looking to diversify their protein consumption, including plant-based options.”

Maple Leaf states that it plans to fund the acquisition, which is expected to be accretive to the company’s earnings in 2017, through cash on hand. The Motley Fool reports that Maple Leaf had $445 million in cash on hand as of September 30, 2016, and credit facilities totaling $630 million, of which only $70 million is being used – placing the company in an enviable position of being able to make comparatively small bolt-on deals for assets like Lightlife that carry with them the potential for significant growth.

In 2016 Lightlight controlled a 38 percent market share of the U.S. refrigerated plant proteins market, and posted sales of approximately $40 million. Founded more than 30 years ago in Turners Falls, Massachusetts, Lifghtlife produces a range of more than 30 products including vegetarian and vegan burgers, hotdogs, beef, chicken, deli meats, tempeh, and breakfast foods.

“The acquisition of Lightlife provides Maple Leaf with a leading market position and brand in the United States in a category that is outpacing growth in the broader packaged foods sector,” said McCain. “We will expand our presence through investment in brand building, innovation and leveraging our respective capabilities.”

Lightlife Foods president and CEO Roy Lubetkin expressed the company’s intent to leverage the deal with Maple Leaf to accelerate its growth and expand its reach within the market.

“Maple Leaf Foods has an industry leading commitment to sustainable protein, including a strategic focus on plant proteins, and being part of this incredible organization will enable the continued growth of our brands,” said Lubetkin.

A Trend Forming?

Global protein consumption is expected to climb at a CAGR of 1.7 percent, reaching 943 million tons by 2054, according to Lux Research. Over this same time period, alternative protein sources are forecast to command up to a third of the protein market. Facts that are not lost on some of the top players in the global animal protein sector.

In October of last year, Tyson Foods – the company whose very name is synonymous with the meat industry – surprised all when it announced that it would be the first key meat company to invest in a meat alternative startup that is aiming to reduce meat production and consumption with plant-based alternatives.

On October 10, 2016, Tyson announced that it had acquired a five percent stake in California-based plant-based protein company, Beyond Meat, for an undisclosed amount as part of a financing round that included previous Beyond Meat investor, the Humane Society of the United States.

Although quite small in comparison to Tyson’s 2014 acquisition of Hillshire Brands for $7.7 billion, this move by Tyson carries significant weight in what it signaled.

“We’re enthusiastic about this investment,” said Monica McGurk, Tyson Foods’ executive vice president of Strategy and New Ventures and president of Foodservice, adding, “which gives us exposure to a fast-growing segment of the protein market. It meets our desire to offer consumers choices and to consider how we can serve an ever-growing and diverse global population…”

-Lynda Kiernan

Lynda Kiernan is Editor with GAI Media and daily contributor to GAI News. If you would like to submit a contribution for consideration please contact Ms. Kiernan at lkiernan@globalaginvesting.com