According to a new industry report released by the Food & Beverage investment banking team from Brown Gibbons Lang & Company (BGL), mergers and acquisitions involving specialty distributors is accelerating, with the recent announcement of several large-scale transactions indicative of continued consolidation across a highly-fragmented, regional landscape. In addition to the economies of scale afforded through consolidation, buyers are looking at acquisitions to expand product offerings, diversify customer mix, and bring value-added solutions to meet evolving customer and consumer demands.

Inside the report, BGL examines the state of the industry, identifying several developing themes that are impacting market dynamics and acquisition strategies:

  • Agile food distributors were able to successfully navigate COVID-19 by swiftly altering business models to not only survive, but thrive after the pandemic, with flexibility paramount to satisfying customer demands. The winners were able to adapt to solve their customers’ ever-changing challenges.
  • Distributors are looking to increase their presence in specialty markets, where differentiated product and service levels afford stronger customer relationships and higher margin profiles.
  • Foodservice distributors are seeking ways to further penetrate the growing and diversified independent customer segment, while also balancing a healthy mix of higher volume, lower-delivery-cost multi-unit chain business.

Strategies such as pursuing geographic expansion, diversification (across customers channels, and suppliers), and the opportunistic entry into new product categories are reflected in recent acquisition activity.

  • Specialty niches are a growing focus of large broadliners within food distribution. Acquisitions are fueling growth in Sysco’s specialty business, highlighted by recent buys in Produce (Coastal Companies, Paragon Wholesale Foods) and Ethnic (Greco and Sons).
  • Private equity has been highly active, underscored by recent acquisitions including Sunrise Produce (Investcorp), FreshEdge (Wind Point Partners), and Lipari Foods (Littlejohn & Co.)