April 13, 2017

German private equity firm Deutsche Beteiligungs (DBAG) has made a double acquisition to advance its goal of gaining a key position in the European chilled meats and ready-made snacks sectors.

The firm has acquired 90 percent stakes in Abbelen, the leading producer of chilled meatballs and ready-made burgers in Germany, and Oscar Mayer, a leading UK producer of ready meals and snacks through its newly launched buyout fund, DBAG Fund VII. Financial terms of the acquisitions were not disclosed, however, Closing Circle states that DBAG Fund VII, which is able to make equity capital investments of up to €200 million per transaction, will be used to fund the transaction. An initial investment of €80 million will be made for the management holding’s first two acquisitions, with DBAG providing €15 million in exchange for a 16 percent stake in the holding company.

Through this move, DBAG is looking to create a “market leader” within Europe’s convenience food sector, through the creation of an unnamed joint holding company that will oversee the management of the two companies – each of which will be managed independently. DBAG Fund VII will hold 90 percent of the interest in the management holding company, while the two managers of the holdings and senior executives of the companies will hold the remaining stake, according to Closing Circle.

Moving forward, the holding company has plans to make further acquisitions of companies that are complementary to its existing portfolio, and which also bring with them product lines that will appeal across multiple markets.

Abbelen produces convenience meats, meatballs, and ready-made burgers at its state-of-the-art factory in Tönisvorst, and supplies all major supermarkets across Germany and in bordering countries, with more than half of all meatballs or burgers produced in Germany for private labels coming from the company. This success is reflected in the company’s yearly revenues that top €140 million (US$148.6 million).

“We were highly successful with our products in Germany in the past years – stronger internationalization [sic] is now the right next step for the company,” said Klaus Abbelen, who is stepping down from the management of the company upon closing of the transaction.

Meanwhile, Oscar Mayer is the leading provider of chilled meats to the UK market – one of the key markets for such products in Europe. (Many Americans may still know the Oscar Mayer song from their commercials). The company produces more than 3 million chilled prepared meals and snacks per week, generating €293 million (US$311 million) per year.

“Creating a European market leader with leading national providers of fresh convenience food products is, in our opinion, an attractive entrepreneurial approach,” said Dr. Rolf Scheffels, member of the DBAG Board of Management. “The market for ready meals and snacks is rarely cyclical and is constantly growing at a high rate, and private labels are benefiting particularly strongly. We are investing in a very attractive segment of the food market.”

Attractive Indeed

Protein is increasingly becoming a central dietary principle for consumers not only in the EU but across many developed markets. Meat consumption in the U.S. jumped by 5 percent in 2015 – the largest increase in 40 years, according to a report by Rabobank Food & Agribusiness Research and Advisory Group. Consequently, consumers are more often opting for snack foods as health plays a greater role in food choices, and younger consumers blur the lines between snacking and formal meals, reports Food Dive. Today, 24 percent of all snack foods are eaten during meal times, according to a report issued by The NPD Group, compared to 21 percent five years ago – a trend that is expected to continue, with expectations that the trend will increase by another 12 percent.

These shifts in consumer sentiment are driving the world’s larger companies to reconfigure their portfolios to include smaller CPG companies and startups that closely identify with these trends, while investment funds like DBAG are creating investment vehicles through which to capitalize upon these trends.

Just last year, General Mills agreed to acquire premium meat snack company EPIC Provisions, a Texas-based producer of meat-based protein bars from ingredients sourced from antibiotic and hormone-free chicken, turkey, pork, bison, lamb, and grass-fed beef; and Hershey acquired Krave Pure Foods – another premium jerky maker that Hershey told Bloomberg could become a brand worth $500 million. Private equity firm Wind Point Partners announced it had agreed in partnership with PepsiCo executive Jose Luis Prado to acquire Chicago-based Evans Food Group, a maker of branded and private label pork rinds and salty snacks. Also, Jack Link’s Protein Snacks announced it had agreed to acquire the meat snack division of Grass Run Farms, a collective of American family farms that produce 100% grass-fed beef and beef snacks.

-Lynda Kiernan

Lynda Kiernan is Editor with GAI Media and daily contributor to GAI News. If you would like to submit a contribution for consideration please contact Ms. Kiernan at lkiernan@globalaginvesting.com.