9 Feb 2022
Food & Leisure
At over £108bn, Agri-business is critical to the health and wealth of the nation. Hands-free farming is one of the many changes coming as food production seeks to increase its efficiency and sustainability. Those that invest in technology to increase yields, reduce the environmental impact and manage production will thrive, be they traditional or organic. Consumers continue to demand increasingly good value via the supermarkets and food service companies. We have worked with a number of producers to move the business through the generations at fair value. Suppliers of services such as software, energy or hardware are well placed for investment and exit.
The UK foodservice market is worth c.£90bn, with c.£20bn in retail, travel and leisure, £5bn contracted and £65bn being hotels, pubs and restaurants. Here in Britain, we show no let-up on our love of eating out or calling it in. The trend is set to continue with Generation Y and Millennials eating out twice as often as those over 45. Market participants who can read these trends and adapt/create a disruptive position will thrive.
The market has been driven by globalisation: you can buy the same kind of TV, phone or car in China, the US or the EU. In holding their market positions, multinationals are driven by innovation and M&A activity, buying fast-growing companies with distinct and growing market positions. Digitisation is becoming a key strategy for consumer businesses as they seek to engage with and influence consumers. If you have a product which fits into a global portfolio or enables businesses to reach their customers, you are going to get a great price.
Brand differentiates. Differentiation gives protection to margins and the opportunity to develop a loyal following which will pay so long as your values are aligned with theirs. Building a successful brand and securing robust routes to market puts you on the radar for M&A activity, where higher prices can be paid if the buyer is able to take your brand into new markets or broaden what is offered. Understanding who your ultimate buyer maybe can help you shape your business as it grows.
The UK hotel market has turned over c.£20bn and has enjoyed 3% growth over the last four years. Deal volumes for the last 12 months have been high at £6bn. However, there are signs that growth is returning in line with GDP growth as the effect of Sterling’s devaluation has been enjoyed. That said, suppliers to the industry will continue to enjoy a strong market as the cycle for refurbishment continues apace.
With more leisure time and a growing desire to seek experiences, especially amongst Generation Y and Millennials, there has been very strong growth in the leisure sector, be that travel, cycling, cooking or gardening. Often businesses which start out as a hobby business rapidly develop a strong market presence and following, which in turn can lead to a strong appetite from investors to help them reach their potential prior to ultimate exit.