Corporate finance advisory firm Shaw & Co has launched its second annual in-depth report into the Food & Drink (F&D) sector, the latest in its regular series of reports that offer business leaders a powerful sector overview and benchmarking tool to aid their decision making.
The report reveals that operators of bars and restaurants, particularly larger businesses following the pandemic are struggling to recover and that other sectors of the food and drinks industry have seen sales remain flat.
The report’s key findings include:
The industry is highly concentrated, with just 7% of the 1,905 companies analysed accounting for 76% of turnover. However, with larger firms’ sales declining, the data shows how effective smaller businesses have been at competing with the giants, with many seeing their sales rise. Achieving scale also opens options to borrow, grow and win market share
It is demonstrably easier to borrow higher multiples of debt once Ebitda hits £5m. As with many sectors, larger more established businesses are offered more lender support which opens more options for further growth.
Mergers & Acquisitions:
91 M&A deals were delivered during past 12 months, of which 77% were completed by UK buyers. The relatively high number of deals reflects how important it is to achieve scale in the sector, while the dominance of UK buyers suggests market knowledge is an advantage when looking to scale up quickly. Perhaps unsurprisingly, deal numbers have actually fallen since the Russian invasion of Ukraine.
Post pandemic predictions:
The sector has recovered well from the pandemic but is facing supply chain interruption and acute food and energy commodity inflation issues, which are not yet reflected in the reported performance numbers. But with good performance, the industry is well positioned to outgrow inflation through organic expansion or by acquisition, if entrepreneurs can recognise opportunities in the midst of uncertainty.
Alexei Garan, Director, Head of Debt Advisory at Shaw & Co and editor of the report, said:
“We are delighted to have launched this, our second annual, in-depth Food & Drink sector report. We hope it will help SME business owners benchmark their own and their peers’ performance in the sector and aid their decision-making processes. Our aim is to provide small business leaders with free access to the same market intelligence as larger blue-chip corporates, who benefit from investment banking advisors. The report will also provide SMEs with valuable insight in terms of their relative creditworthiness and attractiveness from an M&A point of view.”