M&A Deals in the UK Food and Drink Sector Jump 18% Year-on-Year

The number of M&A deals in the UK food and drink sector has jumped 18 per cent to 78 year-on-year, up from 67 the previous year, as buyers targeted fast-growing brands in health & wellness and the premium food sector, shows new research from multinational law firm Pinsent Masons.

Disclosed deal values also rose 25 per cent to £5.5bn, up from £4.4bn the previous year. Private equity firms backed 16 deals or 20 per cent of transactions (26), compared with 18 deals or 27 per cent the previous year.

Food groups and private equity firms are racing to acquire brands linked to the booming functional food and drinks market, targeting fast-growing categories including high protein food and drinks, gut health products and other wellness-focused foods.

The functional food market is estimated to be growing at 8% per annum, faster than that of the overall packaged food market.

Younger consumers are playing a major role in driving that growth. According to research around two-thirds of Gen Z and Millennials purchased functional nutrition products in the last year. Products linked to energy, gut health, immunity, weight loss, muscle support are seen as the most sought after products in the functional food market.

Another area of longer-term growth has been “clean label” products ie those that are free of additives, preservatives or can be described as “natural”.

Recent deals that reflect consumer demand for functional food and drinks include the sale of Huel to Danone, where Pinsent Masons acted for Huel. Huel is a pioneer in the fast-growing meal replacements market associated with the UK’s growing gym and fitness culture.

Tom Leman, Head of Retail and Consumer at Pinsent Masons says: “Recent transactions show that buyers are prioritising existing scale and resilience. Whether through significant deals that consolidate global platforms, or targeted acquisitions that extend into adjacent categories, activity is increasingly trending toward building portfolios that can absorb volatility and respond quickly as consumer preferences shift.”

Among the largest deals was Carlsberg Group’s £4.1bn acquisition of Britvic, as major consumer goods groups use M&A to broaden their portfolios and respond faster to changing consumer habits, such as reduced alcohol consumption amongst a younger demographic.

The deal also reflects a wider trend towards category convergence, with major groups using acquisitions to move into adjacent areas and reduce their reliance on slower-growth categories.

Tom continued, “Large groups are increasingly using M&A to blur traditional category lines, bringing food, beverage, snacking and wellness propositions together into portfolios that can flex in response to consumer demand. Acquiring established brands with loyal customer bases allows buyers to pivot faster as consumer preferences shift.”