Pet Food Processing - November 2023 - 12

TRENDS
Sustainability matters
The influence and confluence of sustainability
in M&A activities also cannot be
understated as ESG (Environmental, Social
and Governance) becomes a higher priority
for companies. Because many consumers
approach sustainability through the lens of
their own experiences, it's important each
company clearly define its efforts and communicate
in a way that resonates with consumers.
This emphasis is particularly important
when considering the rising number
of young pet owners and their willingness
to spend more on sustainable products.
But defining sustainability is far from
straightforward. The Hartman Group,
Bellevue, Wash., found 42% of consumers
are familiar with the term " sustainability, "
but fewer than one in 10 said they
trust companies to be an accurate source
of information on sustainability. Shearson
agreed, saying while sustainability is of high
importance, each consumer has their own
idea of what matters most when it comes to
sustainability.
Nestlé Purina PetCare and Mars Petcare
launched products and projects that
tap into a range of consumer desires including
customization, better-for-you,
premiumization and sustainability. In
September, Nestlé Purina launched its
Top: The J.M.
Smucker Company
divested a number of
its pet food brands to
Post Holdings, Inc.,
including its Rachael
Ray Nutrish, Nature's
Recipe, 9Lives,
Kibbles 'n Bits and
Gravy Train brands.
Post Holdings, Inc.
Bottom: Earlier in the
year, Red Collar Pet
Foods completed
the sale of its Miami,
Okla., pet treat facility
to Nestlé Purina
PetCare Company.
©4kclips - stock.adobe.com
ditional refinement, the company divested a number
of brands in February, including Rachael Ray Nutrish,
Nature's Recipe, 9Lives, Kibbles n'Bits and Gravy Train,
to focus on the mainstream Meow Mix and Milk-Bone
lines. Post Holdings acquired the brands in April as a
part of its Post Consumer Brands segment. Elliott also
cited a continuing evolution of activity within the category
with an increasing focus on freeze-dried and raw
formats in the food space.
But Seth Kaufman, co-founder of BSM Partners,
Bentonville, Ark., cautioned that the academic literature
makes it pretty clear that most synergies or benefits claimed
as part of the justification for M&A are rarely achieved.
" It often takes a level of process and managerial discipline
that is hard to maintain, " he continued. " We also
think that failure to properly understand the acquired
company is part of the issue. Acquirers tend to focus
very one dimensionally on due diligence by focusing on
the financials. They don't spend enough time or have the
expertise to properly evaluate the broader aspects of the
business. Focusing on functional due diligence is imperative
for an acquirer to achieve their hoped-for synergies
and benefits. "
12 PET FOOD PROCESSING | November 2023 | www.petfoodprocessing.net
#PurinaRecyclesChallenge campaign to recycle used pet
food cans and introduced the use of alternative plant and
insect proteins in some of its cat and dog food products.
Mars' Sustainable in a Generation plan aims to bring
more sustainable choices and services to pet owners.
This includes large-scale projects to reduce the company's
carbon footprint, initiate regenerative agriculture,
and achieve a carbon neutral footprint for Mars Petcare's
largest brand, Royal Canin, by 2025.
Looking forward
Shearson has witnessed deals in the industry that include
small- and mid-cap companies with interest in
new, emerging formats like direct-to-consumer and pet
supplements. Through its merger, Ethos Pet Brands has
combined the cutting-edge brands and recipes Natural
Balance is known for with Canidae's connections to the
best in North American agriculture to serve and delight
its customers.
Striving for best-in-class will continue to be important
as more food companies enter the pet food and treat
arena. Kaufman expects wellness, functionality and veterinary
care will continue to be of interest to investors.
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Pet Food Processing - November 2023

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