Pet Food Processing - November 2023 - 11

TRENDS
The acquisition of Champion could open
up shelf space in the independent pet store
channel for brands not part of big CPG. "
Tom Elliott, Capstone Partners
driven a significant wedge into the sales of premium foods,
according to Shannon Brown, brand manager, Packaged
Facts Pets, The Freedonia Group, Cleveland.
But recent stock activity has shown that traders may
not be feeling overly bullish about the pet market with
ProShares' Pet Care ETF (PAWZ) hitting its lowest stock
price for 2023 at the beginning of October, down 21%
from its 2023 high in February.
Category growth
A multiplicity of strengths has made the industry ripe
for mergers and acquisitions over the last couple of
years. From July to December 2022, Pet Food Processing
covered 35 mergers and acquisitions with an additional
28 taking place between December 2022 and June 2023,
prompting ongoing growth in the category.
But compared to 2022 and 2021, there's been a slowdown
in pet market-related acquisitions in 2023. This is at
least in part due to heightened interest rates, Brown said.
" Both Capstone Partners and Cascadia Capital, investment
groups with interests in the pet market, have recently
noted that most pet food-related acquisitions in 2023
have targeted premium pet foods and have been motivated
by supply and production demands, " she continued.
Examples of this include St. Louis-based Post
Holdings' recent agreement
to acquire Perfection Pet
Foods, a Visalia, Calif.-based manufacturer of private
label and co-manufactured pet foods and baked treats,
as well as its acquisition of several pet food brands from
The J.M. Smucker Company; BrightPet Nutrition's acquisition
of Raw Advantage, Cedar Rapids, Iowa; Hill's
Pet Nutrition's acquisition of three Red Collar Pet Foods
manufacturing facilities; and the merger of Canidae,
Stamford, Conn., and Natural Balance, Burbank, Calif.,
to become Ethos Pet Brands, Brownwood, Texas.
Tom Elliott, managing director, consumer investment
banking, Capstone Partners, Boston, also cited the notable
impact of the acquisitions of Champion Petfoods
by Mars Petcare and Red Collar Pet Foods by Hill's.
" The acquisition of Champion could open up shelf
space in the independent pet store channel for brands
not part of big CPG, and the acquisition of Red Collar
by Hill's may remove a very large co-packing partner for
many smaller brands, " he said. " Those in the industry
are still waiting to see how both of these moves will play
out in the market. "
Over the last 10 years or so, the pet food industry has
www.petfoodprocessing.net | November 2023 | PET FOOD PROCESSING 11
become a very attractive category for businesses in general,
according to Greg Shearson, interim chief executive
officer for Ethos Pet Brands.
" With steady increases in the penetration of pets and
pet households at an all-time high, it's easy to see why
pet parents are considered highly loyal, " he continued.
" These consumers are interested in trading up and motivated
to do the very best for their pet family members. "
Shifting portfolios
Companies of many sizes have taken notice, witnessed by
the number of M&As over the last five years or so. General
Mills, Minneapolis, entered the pet food arena with its acquisition
of Blue Buffalo in 2018. To date, a handful of players
hold more than 60% of global market share.
Mars Petcare, McLean, Va., which acquired Natura
and Eukanuba, holds the majority share in the global pet
food market. Other top players include Nestlé Purina
Petcare, St. Louis; Colgate-Palmolive, Manhattan, NY
(owner of Hill's); The J.M. Smucker Company, Orrville,
Ohio; Diamond Pet Foods, Meta, Mo.; Merrick Pet
Care, Inc., Amarillo, Texas; and Wellness Pet Company,
Tewksburg, Mass.
These players continue to shift and divest holdings to
zero in on focus areas within the category. In December
2021, The J.M. Smucker Company sold its private label
dry pet food business to Diamond Pet Foods. In an adM&A
activity in the
pet nutrition space
can be seen across
the globe, with UKbased
Butternut Box
recently scooping up
PsiBufet to expand
the presence of
its fresh dog food
throughout Europe.
Butternut Box
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