Ben Hirschler and Martinne Geller London
A BOOM in “nutraceuticals” – food and drinks with potential health benefits – is paving the way for a rush of deals, as food and drug companies compete to dominate a market expected to be worth $280 billion (R3.4 trillion) by 2018.
Consumers have been encouraged to eat smarter by an obesity epidemic and a burst of fitness-focused technology like gadgets and apps to track exercise and calorie intake.
Now companies supplying goods like probiotic yoghurt, advertised as being healthier for the gut, and omega-3 biscuits, thought to improve brain and heart function, have seen demand rise sharply.
“It’s only a matter of time before the fight spills over into corporate takeover wars,” consultancy KPMG predicted in a report released yesterday.
Blurring line
Bankers said moving into nutraceuticals was an obvious move for both food and pharma companies given the blurring line between their sectors.
“The space is ripe for mergers and acquisitions and I think you are going to see more,” added Jeremy Johnson, the managing director of North Carolina-based Bourne Partners, which advises on deals.
Food firms would probably take the lead, chasing healthy products to improve their profiles while drug companies, rocked by patent expiries and the rise of biotech medicines, looked to divest units, said Bourne Partners, which estimated the market to hit $280bn in 2018 – double that of 2011.
Mergers and acquisitions activity so far has been relatively small, but the pace is picking up. Bourne counted 185 mergers and acquisitions involving private and public nutraceutical companies in 2014, up from 95 in 2011.
“It’s an industry which has seen a lot of interest and is likely to see a lot of deals,” one consumer industry banker said, adding that many smaller companies were looking to deals with bigger players to help them reach their potential customers.
While the concept of nutraceuticals is not new, KPMG head of life sciences Chris Stirling believes the focus on health will spur more tie-ups as firms seek to exploit increased consumer awareness.
“The consumer arms of pharma companies are going to have to look at this area hard because there is so much public interest.” – Reuters