Spike in Investment Activity Envisaged in European Organic Food Industry

Growing industry confidence is leading to a flurry of mergers, acquisitions and investments. Although large companies are mainly investing, small-medium sized firms are also expanding in the improving economic climate.

2/14/2011 --- A spike in investment activity is expected in the European organic food industry as market growth rates rise and capital becomes more accessible. Organic Monitor predicts European sales of organic food & drink to rise by 8 percent in 2011.

Growing industry confidence is leading to a flurry of mergers, acquisitions and investments. Although large companies are mainly investing, small-medium sized firms are also expanding in the improving economic climate.

Hain Celestial has strengthened its European presence by recently acquiring two food companies. It has bought Danival, a leading French producer of organic foods. GG Unique Fiber, a Norwegian natural foods company has also been acquired. Both companies will be integrated into the European operations of Hain Celestial.

The US natural & organic food company is slowly building a global presence. Hain Celestial has a strong market position across various product categories in North America. Apart from Europe, it also has its sights on Asia. It has a strategic tie-up with Hutchison China Meditech, and recently launched organic infant formula in the Chinese market.

Another major deal in recent months involves Léa Nature, which has become the leading French organic food company. It made an investment in Ekibio in December. Ekibio is involved in the manufacture and distribution of organic foods. Léa Nature is a highly diversified enterprise, involved in nutraceuticals, natural cosmetics, ethical textiles as well as organic foods.

Organic Monitor expects more such investment activity. Royal Wessanen is tipped to acquire more organic food companies in 2011. The Dutch firm has been divesting companies in North America so it can focus on the organic food industry in Europe. Its recent divestment was Panos Brands to a private equity firm in December.

In the UK, Abel & Cole is being eyed by a number of supermarket chains. Abel & Cole operates the largest home delivery scheme for organic products in the UK. Green & Black’s, another leading organic food company, is rumoured to be the subject of a management buyout. In 2005, the organic confectionary firm was acquired by Cadbury’s, which was subsequently taken over by Kraft Foods a year ago.

Such investment activity is consolidating the organic food industry. Unlike North America, there remain a large number of small-medium sized firms in Europe. With healthy growth rates resuming and more capital becoming available, more deals are on the horizon.