After mergers and acquisitions in the food industry hit a 15-year high last year at 505 deals, it looks like 2017 will match or surpass last year’s activity as high profile deals continue apace.
Swander Pace Capital announced it has agreed to acquire Passport Food Group, a Southern California-based producer of international and ethnic foods for distribution through retail and foodservice channels across North America. Financial terms of the deal were not released.
Founded in 1978, Passport began as a family-owned business making noodles to supply to Chinese restaurants in Los Angeles. Over the years, the company has grown to offer a portfolio of over 125 products it sells under the brand names Wing Hing and House of Bee to high profile customers including P.F. Chang’s, Panda Express, Cheesecake Factory, Applebee’s, and Houlihan’s.
Swander Pace is a private equity firm with offices in San Francisco, New Jersey, and Toronto that targets investments in companies that play key roles in consumers’ lives across three domains: Food & Beverage, Body & Wellness, and Home & Family. Once in Swander’s portfolio, the firm creates value in its companies through connecting them with its SPC Playbook, its senior team, and its broad network. To date, Swander Pace has invested in 45 companies and has raised cumulative equity of approximately $1.8 billion since 1996.
Ethnic Foods Booming
Food Processing reports that 88 percent of Americans eat at least one ethnic food per month, while 17 percent eat ethnic food at least seven or more times per month. In addition, almost one-third of all U.S. consumers have eaten an ethnic food that was new to them over the past year, according to data from the National Restaurant Association.
Driven by population growth, demographic shifts, and a broadening of consumer tastes, sales of ethnic foods in the U.S. reached $11 billion in 2013 and are on pace to reach a value of $12.5 billion by 2018, according to Statista.
“…consumers’ appetite for specialty and ethnic foods continues to grow,” said Brian P. O’Connor, managing director of Vestar Capital Partners. “Demographic trends also support a bright outlook for specialty foods. Specialty foods are on trend in a big way.”
Swander Pace agrees. Heather Smith Thorne, managing director at the firm, said, “With consumers increasingly looking for creatively flavored, high quality foodservice and retail products, Passport is well-positioned to leverage these trends and drive growth through a continued commitment to innovation, new products, and best-in-class manufacturing.”
Based on these consumer shifts toward ethnically diverse flavors and foods, large CPG companies and investors have earmarked ethnic food producers as a means to diversify their portfolios while tapping into an on-trend channel of increasing returns.
In October 2016, North American packaged food giant ConAgra Foods announced it had agreed to acquire the specialty packaged food business of Frontera Foods – a maker of premium Mexican food products including salsa, sauces, and meals – and Red Food LLC, a producer of premium American cooking sauces including the Frontera, Red Fork, and Salpica brands for an undisclosed amount.
This deal was the first deal for ConAgra since the group moved its headquarters to Chicago in June of last year, and reflected a strategy shift adopted by the company ever since Sean Connolly assumed the role of CEO.
“It is our strategy to reshape our ConAgra portfolio to be more premium and more contemporary,” Connolly told The Herald.
ConAgra is not the only North American food giant expanding their ethnic food segments as a way of remaining competitive. US Foods acquired Italian specialty food distributor Jeraci Foods for an undisclosed amount in a deal that closed in October of last year.
Additionally, Grey Mountain Partners acquired Illinois-based Mediterranean food manufacturer and distributor, Kronos Foods, through its third fund for an undisclosed amount that same month. Earlier last year, United Natural Foods Inc. agreed to acquire Haddon House Food Products Inc. – a distributor and marketer of natural, organic, and gourmet ethnic foods throughout the Eastern U.S., including certain affiliates and real estate assets, in a deal worth $217.5 million.
-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.