Meat industry ‘attractive’ for investors, say analysts
Published:  17 October, 2017

Meat may be under pressure from inflation, labour shortage and challenges to productivity, but it is still an attractive industry for investment, according to financial experts. 

Britain has been witness to a slew of mergers and acquisitions in recent months and there is little to suggest activity will slow down. In fact, analysts are braced for a flurry of deals as a host of factors tighten margins, making profit generation harder.

Nicholas Bell, associate partner at OC&C Strategy Consultants, said the UK was an “attractive place” for investment that could “heat up”.

“A few years back this was perceived as a low-margin, own-label business with significant exposure to commodity spikes, especially by financial investors,” Bell told Meat Trades Journal.

“We’ve seen the nature of retail relationships change to give more stability, and the best meat businesses are really focusing on driving carcase value. As a result, there are meat businesses that demonstrate that this can be a stable, attractive margin sector, which is actively driving the category forward and creating value for retailers and manufacturers. The turnaround and subsequent sale of Karro demonstrates that.”

Aside from the takeover of Moy Park by Pilgrim’s Pride for around £1bn, top meat industry mergers and acquisitions generated £240m, according to Oghma Partners’ data up to the end of August.

The value of meat industry deals has more than doubled since 2016, its research also suggested.

Meanwhile, Emmanuel Savoye and Eric Kang, both Moody’s analysts, expect deals among the smaller meat industry players to increase in the next 12 months.

“Consolidation involving large producers would likely raise anti-trust concerns, but could continue among smaller companies,” the pair told this site.

“Small producers, which will likely be the most affected by pricing pressure and rising costs, could go down the M&A route to achieve scale and merger synergies in order to offset these headwinds.

“The market also currently offers attractive funding costs given the low interest rate environment and abundant liquidity.

“Companies in the sector are already under pressure to increase productivity and innovation given the competition in the sector, as well as margin pressure from retailers and cost inflation.”