China Takes Back Top Spot for U.S. Agricultural Exports
In 2020, farm exports from the U.S. to China increased dramatically. Soybean exports increased 53% from 2019 as China tried to boost its swine population after a crippling swine disease. As of March 10, 2021, the futures price of oil oilseeds was 64% higher than in 2019. Increased soybean production is expected to remain through 2021 as U.S. farmers are expected to plant 7 million more acres of soybeans this year.1
U.S. Agriculture Giants Feel Increased Antitrust Pressure
Archer Daniels Midland Co. (NYSE: ADM) agreed to pay $45 million to settle a civil lawsuit alleging their peanut division colluded to hold prices down. The settlement was announced after Birdsong Peanuts and Olam International also agreed to pay a combined $58 million in a similar suit. The three companies collectively make up 90% of the peanut processing industry. Similar suits have been aimed at other prominent players in meatpacking, beef processing, and poultry.2
Wage Increase Mandates Cause Grocery Store Closures
Cities such as Seattle, WA, Long Beach, CA and, Los Angeles, CA passed mandates that require supermarkets to increase wages for workers who remain at risk for COVID-19 exposure. Grocery stores, which historically operate with thin margins, will face increased wage expenses and will need to decide whether to pass the increased expenses to consumers or to close store locations. Kroger Co. (NYSE: KR) announced it will close two stores in Long Beach, CA, and two stores in Seattle, WA, due to the increased expenses. Other grocery chains, such as California-based Gelson’s Market, have increased food prices and decreased staff to help offset the increased expenses.3
Nestlé S.A. Divests Much of Nestlé Water North America
Private Equity firms, One Rock Capital Partners and Metropoulos & Co, have agreed to acquire Nestlé Waters North America from Nestle S.A. for approximately $4.3 billion. The deal is expected to close in the spring. The company retains ownership of Perrier, S. Pellegrino, and Acqua Panna brands. The sale includes Poland Spring, Deer Park, Zephyrhills, and Pure Life, among others. Nestlé recently announced a strategic realignment for its global water portfolio, indicating a shift of focus to premium water brands.4
High-End Liquor Sales Increase at Fastest Pace in Decades
Sales on premium liquors, costing $40 or more for 750 mL, accounted for 40% of the U.S. spirit industry growth, compared to 34% in 2019. High-end tequila brands Don Julio and Casamigos increased North American sales year over year by 55% and 137%, respectively. Whiskey sales increased 8.2%, and cognac sales increased 21%, year over year. Consumers were largely unable to purchase alcoholic beverages in restaurants and bars during 2020; however, industry experts expect this trend to continue as consumer tastes and preferences have changed throughout the pandemic.5
PepsiCo and Beyond Meat Form Plant-Based Partnership
PepsiCo, Inc. (NASDAQ: PEP) and Beyond Meat, Inc. (NASDAQ: BYND) announced in January that they have joined forces to create the Planet Partnership LLC, focused on plant-based snacks and beverages. The partnership is poised to help Beyond Meats push further into supermarkets and help PepsiCo diversify the company’s extensive portfolio of snacks and beverages. 2020 year-over-year sales growth for plant-based snacks and beverages increased 10.6% and 13.5%, respectively, growing faster than traditional snacks and beverages.6
Severe Weather Impacts Southern U.S. Poultry and Dairy Farmers
Severe weather conditions, which struck the Southern U.S. in February, took a significant toll on poultry and dairy farmers and producers. The major chicken company, Sanderson Farms, Inc. (NASDAQ: SAFM), announced that it euthanized 545,000 chicks and lost 455,000 and 703,00 chickens and hatching eggs, respectively to frigid temperatures. Dairy farmers in Texas were forced to dump 14 million gallons of milk after losing access to natural gas, resulting in a projected loss of $30 million to $40 million. Frigid temperatures also impacted dairy farmers in Oklahoma, resulting in roughly 15% of calves being lost.7
Largest Transactions Closed
- Nestlé Waters North America Inc.
- One Rock Capital Partners, LLC; Metropoulos & Co.
- Wine And Spirits Portfolio Of Constellation Brands, Inc.
- E. & J. Gallo Winery, Inc.
- QuickChek Corporation
- Murphy USA Inc.
- Green Garden Products LLC
- Central Garden & Pet Company
- Paul Masson Grande Amber Brandy Brand of Constellation Brands, Inc.
- Sazerac Company, Inc.
- Wholesome Sweeteners, Inc.
- Whole Earth Brands, Inc.
- Hu Master Holdings, LLC
- Mondelez International, Inc.
- Controlled Environment Agriculture (CEA) Facility and The Property in Morehead
- AppHarvest, Inc.
- Dry pasta business of Catelli Foods Corporation
- Barilla America, Inc.
- US Based Chile Pepper Business of Mizkan America, Inc
- Olam Americas, Inc.
Source S&P Capital IQ as of 4/12/2021 and PCE Proprietary Data
This report represents transaction activity as mergers & acquisitions, consolidations, restructurings and spin-offs. Targets are defined as U.S. Based companies with either foreign or U.S. based buyers. Transaction information provided is based on closed dates only.
EBIT - Earnings Before Interest and Taxes