Food and drink manufacturing sector bounces back after Covid – BDO

Published by

Peter Davison

Mergers and acquisitions activity in the food and drink sector has bounced back from the Covid-19 pandemic after a "a tumultuous year in 2020," according to a new report by Bristol- and Reading-based accounting firm BDO.

Its Food & Drink Manufacturing Review 2022 says M&A activity in the sector was up by 20 per cent during 2021, only 10 per cent lower than pre-pandemic levels.

This has been achieved despite the many and various challenges faced by the industry, including supply chain issues, labour shortages, new Brexit rules and the ongoing impact of Covid-19, says the report.

Institutional investors continue to be attracted to the industry dynamics, with private equity accounting for nearly a third of all deals in 2021.

The report looks at some of the key transaction trends in 2021, including a rise in deals in the plant-based and free-from subsectors.

It also examines the emerging agritech subsector that is at the forefront of delivering new technologies to the industry.

It's not all good news in the sector though, according to the report, with the food to go subsector seeing transaction volumes decline year on year, reflecting the Covid-19 impact and increased working from home.

Confectionery deals have also declined in 2020 and 2021 as trends continue to point towards healthier food and drink options being attractive to consumers.

The report also looks forward to some of the key challenges facing food and drink manufacturers in 2022, which will be marked deeply by Russia’s invasion of Ukraine as well as the rising costs of energy prices and inflation increases.

Labour shortages and supply chain disruption are also likely to hit the industry, according to the report, as will the plastic packaging tax and advertising restrictions on food and drink high in fat, sugar and salts.

"The famed resilience of the food and drink industry will continue to be tested by multiple headwinds," said report author Roger Buckley, M&A partner at BDO. "However, there is no shortage of investment available or acquirers waiting to grow and develop businesses in the industry."

The report can be downloaded at https://www.bdo.co.uk/en-gb/insights/industries/manufacturing/food-drink-2022-manufacturing-review

Peter Davison

Peter Davison is deputy editor of The Business Magazine. He has spent his life in journalism – doing work experience in newsrooms in and around Bristol while still at school, and landing his first job on a local newspaper aged 19. By 28 he was the youngest newspaper editor in the country. An early advocate of online news, he spent the first years of the 2000s telling his bosses that the internet posed both the biggest opportunity and greatest threat to the newspaper industry and the art of journalism. He was right on both counts. Since 2006 he has enjoyed a career as a freelance journalist. He lives in rural Wiltshire with one wife, two children, and three cats.