May 11, 2015

Although the entire Spanish economy has been hit by recession, its food sector has proven to be more resilient than others. The food industry is Spain’s biggest economic sector, accounting for 2.7% of the country’s gross domestic product (GDP) according to its food and beverage industry association, FIAB. So it’s not surprising that the food industry is playing a large role in Spain’s economic recovery, with global investment funds from the U.S. and elsewhere adding Spanish food businesses to their portfolios.

Foreign demand for Spanish foods is growing faster than domestic demand. Exports increased 5.5% in 2014, generating $4.7 billion according to the Valencian Institute of Economic Research, with particular increases to the U.S., Chinese, British, Japanese, and Southeast Asian markets.

In addition to healthy export demand, domestic spending by Spanish families increased by 1% last year according to the INE, Spain’s Bureau of Statistics. And the fact that most Spanish food businesses are smaller, family-run operations makes them attractive to large multinational players looking to diversify or consolidate their businesses.

“The reactivation of the economy set the ground for a flow of new investments in food retailing and distribution, with a special focus in coffee bakery chains. It is a pretty new business in Spain, but it keeps growing as the number of costumers is increasing,” Carlos Perez de Jauregui of Nazca, one of the most prominent Spanish funds in the food sector tells TheStreet.com.

These combined factors have garnered the attention of some of the largest global funds over the past several months including:

·         In 2014, Miami-based HIG Capital formed Compania del Tropico as the holding company of Café & Te and Panaria, two bakery chains that control a combined seven brands.

·         In December 2014, UK-based investment firm CVC acquired 48% of Spain’s Deoleo, one of the world’s biggest olive oil companies.

·         In February 2015, the Carlyle Group acquired Spanish specialty food manufacturer and distributor, Palacios Alimentacion, which generates 25% of its revenue outside of Spain exporting foods to more than 30 countries.

·         Kohlberg, Kravis, Roberts (KKR) led a consortium of funds investing $227 million in Spanish pizza delivery business, Telepizza.

·         And, in 2013, Oaktree Capital Group raised its stake in Spanish bakery business Panrico from 86% to 100%.

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