Mergers and acquisitions activity in the agri-food and beverage sector in 2020 (II):

The fruit and vegetable sector, together with the meat sector which we reviewed in our previous article, has had a leading role in the acquisition activity in 2020.

Broadly speaking, we can say that it sold € 10.4 B in 2019, of which 40% were fresh fruits, 48% fresh vegetables and mushrooms and the rest processed products. 80% of the volume is in the hands of companies located on the Valencian, Murcia and Almeria coastlines.

Furthermore, in 2020, home consumption of fruits and vegetables increased by 11% in volume and 19% in value as a result of the change in habits during the confinement phases.

The foods most in demand respond to our consumption habits: omelette, stir-fry and salad, in this order. Thus, the most produced are potatoes, tomatoes, onions and peppers and then lettuce and carrots, with variations depending on whether we are talking about amount or volume.

It is eminently an exporting sector, which concentrates 9% of the volume of world exports, being the world's leading exporter, with 10 M tons of food annually. Its main destinations are Germany, France and the United Kingdom. It can be said that Spain is the vegetable garden of Europe.

From an international point of view, Spain accounts for 24.4% of European fruit sales and almost a third of vegetables. Italy and France follow by far. And also at the level of cultivation surface, in fruits it represents up to 40% of the total surface of Europe.

Concentrated in a few companies, the top 5 groups invoiced around € 3 B, 30% of the sector, of which almost 2 B went to export. Thus, AM Fresch sold € 868 million, Anecoop € 713 million, Citri & Co € 471 million, Eurobanan € 470 million and San Lúcar € 440 million. In this business structure we only find 37 companies with more than 200 employees and only 14 really large ones, with more than 500 employees.

A sector with a reasonable added value: value added at factor cost versus sales, an indicator that gives an idea of ​​the manufacturing cost, which is 18%, lower than that of pasta (32%) or beverages (25 %), similar to that of dairy products and higher than that of the meat industry (17%), fish (15%), starches and flours (12.5%) and fats (8%).

These data give us an idea of ​​how attractive the companies in this sector are for venture capital funds: pan-European, countercyclical activity, possibility of becoming world leaders through add-ons, existence of natural entry barriers such as land and climate, with potential of improvement and growth, possible automation, new crops, new ranges and a remarkable cash generation capacity, in which investments in CAPEX have relatively fast returns. A great fishing ground for fund money.

Given the above, it is not surprising that, despite Covid, 8 notable operations have been registered, with all the companies acquired adding up to a total sales of € 408 million:

✔    GPF has bought Frugarva (€ 52 M), an add-on to be integrated into its citrus holding The Natural Fruit, together with Fruxeresa and Frutas Naturales, to position it as the lemon leader in Europe with € 200 million in sales.

✔    Alantra acquired Surexport (€ 160 M), which produces soft fruit, a platform to build a European leader in the berry industry.

✔    Nazca has carried out two operations: the purchase of Almond (€ 47 million), producer and marketer of organic and bio products and supplier to Mercadona and Naturgreen, and the purchase of Eurocebollas (€ 21 million), a benchmark in the production of cooked onion.

✔    MCH, together with San Lúcar, has entered Antonio LLusar (€ 63 M), which sells 52 m t of oranges (25%) and clementines (75%), 85% of which are exported.

✔    Acon bought Solán de Antequera (€ 23 M) before the summer, a company that manufactures canned vegetables.

✔    The Meridia Capital fund has made its debut in this sector with the purchase of Zummo (€ 20 M), which operates in the food-service, vending and retail segments

✔   Lastly, the ICF entered into Batlle seeds (€ 22 million) with an investment of € 3 million.

But the funds are going to find stiff competition to get the deal: the dry powder of the Spanish mid-market funds for investments in the peninsula is estimated at € 5 B, to which it must also be added the investment appetite of family offices, the money available from companies in the sector not related to venture capital, hybrid credit institutions and above all and increasingly, the dry powder of global international funds that decide to focus on Spain.

And with these figures and market shares, we are going to start seeing exist form the owners of the companies towards the big world operators and the big funds.