The sectors being impacted by mergers and acquisitions (M&A) change over time.
Much consolidation has occurred in the grocery retail sector over the last several years, some of which is still ongoing—such as the potential Kroger-Albertsons deal.
The same can be said for foodservice distributors, processors, and growers, which are now in a major consolidation phase according to Steve Grinstead, CEO of FreshEdge.
“There are sectors of the industry that I believe can be too big, particularly single-location fresh processing operations,” he observes.
But, Grinstead adds, “For the most part, we have a long way to go before companies become too big in our industry in general. I believe consolidation is positive for our industry and will make us more efficient and effective.”
ALIGNMENT IS KEY
In addition to its 2022 greenhouse acquisition mentioned earlier, Lipman Family Farms BB #:110471, an integrated network of growers, fresh-cut processors, and distributors of fresh produce, has grown through acquisitions for many years.
Purchases over the last decade include Huron Produce of Exeter, ON; Sam’s Produce of Denver, CO; and The Produce Exchange, Inc. of Livermore, CA.
“We’ve maintained a disciplined growth strategy that includes acquisitions and investments in organic growth opportunities,” comments Elyse Lipman, the fourth-generation family member to serve as the company’s CEO.
“The strategy has worked well,” Lipman says. “We increased our geographic footprint, but primarily added great people. We’re a family business, as are the companies we acquire. If there isn’t a clear cultural fit, we pass.”
Copacetic partnering
This alignment between buyer and seller is a key factor for success in M&As of all types.
When Legacy Farms BB #:167426 acquired the assets of family-owned Frieda’s BB #:388120, in January 2023, one of the draws was Frieda’s strong culture and branding, which has helped it become one of the bestselling brands of specialty produce in the United States, with a 30-percent faster velocity than the next leading brand, according to the company.
“The transition couldn’t be going any smoother,” observes Alex Jackson, vice president of sales and procurement at Frieda’s, and granddaughter of the late Frieda Caplan, the company’s founder.
“Our company values are aligned in such a way that the synergies continue to appear and pay off. We know not all acquisitions go this smoothly,” she adds, “and we know it takes hard work to capitalize on the partnership.
“We’re proud of the growth we’ve been able to achieve thus far and look forward to what’s to come.”
Ushering in possibilities
Jackson sees the recent M&A activity in the industry as positive.
“The recent mergers and acquisitions in the fresh produce industry may be changing the landscape of ownership; however, I see them providing more opportunity for business to thrive in our industry.
“This industry was built on family founded and owned businesses that have the potential to grow with the right investment,” Jackson goes on to say.
“To see companies with strong values, a clear mission and vision, and strong team members be able to rapidly grow and strengthen because of an acquisition indicates a strong future for the produce industry, even through the unprecedented challenges we will continue to face.
“Combining the resources of each company to strengthen their positions throughout the supply chain is the greatest benefit,” Jackson continues.
Considering the challenges
“The challenges come if your team isn’t ready to move and adapt to change at rapid speed. It’s been exciting to see the Frieda’s, Legacy, and Cal Fresco teams adapt so quickly, so we can take off running.”
“There’s risk in any deal,” notes Lipman, but says there are often clear reasons for a merger or acquisition to occur.
“Often family produce companies come to a juncture where continuing to be on their own isn’t best,” she explains. “As an industry, there’s untapped opportunity to align and find synergies to be more efficient and deliver more healthy produce to everyone.”
“The produce industry is still a highly fragmented industry that needs to be consolidated,” opines Grinstead.
He notes that individual M&A deals can be good or bad, and the loss of family-owned businesses is not necessarily a good thing.
But, he points out, “Those families do get to have a liquidity event for all of their hard work over the years.
“It’s increasingly more difficult for those smaller businesses to compete as the costs of appropriate food safety [measures] and up-to-date technology are very expensive.”
This is an excerpt from the cover story in the July/August 2023 issue of Produce Blueprints Magazine. Click here to read the whole issue.
