November 08, 2022
The COVID-19 pandemic, global warming, the Russia-Ukraine conflict and global economic challenges. These are just some of the issues that are severely impacting the food and beverage industry across the globe. This, together with shifting consumer habits and lifestyle trends, is seeing this sector going through unprecedented change. While change within any sector is expected and par for the course, given the magnitude and pace at which the food and beverage industry is changing, what might this sector look like come 2050?
Scenario planning is a recognised tool for gaining foresight about plausible futures. Contemplating these alternative futures within this industry is important, not only to stay ahead of the curve, but to also identify business opportunities to be found. To illustrate this point, Deger Becer, Partner at Translink Corporate Finance Turkey and Head of Translink’s Food and Beverage Group, cites the example of plant-based cultivated meat. What was only in a research phase just ten years ago, is today a multi-billion-dollar industry, which will be growing exponentially in future.
By combining Translink’s five decades of experience within the food and beverage sector, together with insights from the Institute for Futures Research at Stellenbosch Business School in South Africa, four alternative futures for the food and beverage sector have been outlined.
Professor Andre Roux, Head of Futures Studies Programmes at Stellenbosch Business School, says that this scenario planning is not about making predictions. “What we are trying to do is to seek more knowledge about all those potential factors that shape the future,” he says.
The Tomorrow: 2050 Alternative Futures for Food and Beverage report outlines multiple driving forces that will influence the future of this sector and are categorised as political, economic, social, technological, environmental and legal or regulatory drivers.
These driving forces were then further analysed by the research team, each being assessed for its level of uncertainty and the extent to which any shifts could influence the futures of the food and beverage sector over the next three decades.
This evaluation produced five key uncertainties. These include:
- Increasing conflicts
- Changing attitudes about food waste
- Biodiversity loss and climate change, and the successful mitigation thereof
- Development and adoption of technologies
- Shifts in geopolitical competition
The latter two were further identified and analysed as factors that have the strongest influence on the other factors as well as being strongly influenced by the other factors.
Using these driving forces as a foundation, the research team then formulated possible future scenarios within the food and beverage sector, and their corresponding impacts on M&A.
Here is a synopsis of each:
In this scenario, the food and beverage sector in 2050 sees global cooperation to eradicate hunger as well as a strong global pact to mitigate biodiversity loss and climate change. Policies, governance, and a strong focus on regenerative farming creates an enabling environment. Within these relatively open markets, companies that successfully develop technologies for cultivated, 3D printed, and personalised food and beverages are able to grow fast, although these advances are limited and may only benefit the elite.
What this means for M&A
- Although limited scope for new technologies, open markets and global cooperation enables cross-border deal making.
- International joint ventures and collaboration that focus on eradicating hunger are commonplace, including the distribution of excess produce to areas of need.
- Interesting opportunities exist for information systems about expected yields and monitoring and reporting on mitigation of biodiversity loss and climate change.
- Technologies cultivated or personalised products developed in an unethical manner will sour some M&As.
- Some dealmakers will be successful in identifying pockets of opportunity aimed at higher-income consumers.
“We are in a world here where we are in a favourable environment governmentally, yet on the technology side, there are certain impediments. In terms of M&A within this scenario, there is definitely limited scope when it comes to new technology,” says Becer.
Here, global collaboration means shared genetic and biological information to explore and harness the health benefits of personalised dietary advice. Advances in biological science fuel innovation in the fields of cultured meat, 3D printed foods and personalised beverages.
There is also a strong global commitment and significant progress made to eradicate hunger across the planet.
“Technology here is developing, both in terms of creating personalised food and beverage, as well as addressing how the customers’ needs and habits are being met. In this scenario, everything is very coherent and ethical, with decisions made based on the benefit of all and not only to meet the needs of a specific group of people,” Becer says.
What this means for M&A
- There are lucrative opportunities for deals with a global reach, with a dual focus to secure local food and beverage supply while participating successfully in global markets.
- Mergers serve to shorten the food and beverage supply chain.
- Interesting deals happen to facilitate and support skills development.
- International joint ventures and cooperation are commonplace between digital/platform organisations and traditional players.
- M&A deals are used to acquire footprints into new markets, particularly of the rapidly growing middle income consumers.
- The adoption of technologies to enable personalised nutrition open M&A opportunities.
- The well-considered regulatory environment is tough, but clear.
In this scenario, 2050 is a time of nationalism and protectionism, with only a few close alliances between regional or neighbouring countries. Each country aims to be self-sufficient in terms of food and beverage supply. DNA and microbiome testing is available to citizens, but this information is closely guarded and not shared. Mitigation of biodiversity loss and climate change is limited to the parties that buy into the concept.
Johannes Wolters, Partner at Translink Corporate Finance in Germany, says that here we see very few alliances between countries. “In some ways, we are already seeing this in our world, if you consider the conflicts and the protectionism that already exists,” he says. “In this scenario, trade between countries will be complicated, because every country will be trying to protect itself, and we see this already in certain areas of the world”.
What this means for M&A
- Limited opportunities for cross-border deals with M&A deals having a narrow, mostly national geographical scope.
- Good opportunities exist for deals within national borders with first and fast movers gaining the advantage in these narrow markets.
- M&A decisions are led by profit motives and acquiring ‘the next food and beverage technology’.
- Governments support deals that increase the country’s level of food and beverage self-sufficiency.
- Some deals focus on talent and skills development for the national food and beverage sector.
Governments regard food as an object of strategic national importance, leading to increased protectionism. Traditional cultivation methods are prevalent as is strong competition for natural resources, increased by the effects of climate change and poorly mitigated biodiversity loss.
Although farming methods remain traditional, alternative produce, with a lighter environmental impact, are cultivated.
“This is probably the worst scenario, and hopefully the least likely one, says Wolters. “Looking closely at this scenario, there are a lot of things included here which are already being observed in some places globally. While this scenario may not be very far away from our current reality, we hope it remains far away from the future,” he says.
What this means for M&A
- The strong protectionist stance of governments make cross-border deals difficult. Many M&A deals are derailed by extensive compliance and regulations.
- Interesting M&A opportunities exist in countries where the acceptance of alternative food and beverage products is growing.
- Deals are made between organisations that enable and support regenerative farming within certain geographical areas.
- In many areas, the only deals available are the ones that strengthen the traditional supply chain within a national border.
“In my view, there will not be a purely isolated scenario going forward. We are going to see a combination of these to a certain extent, based on timelines, geography and on the socio-economic realities of different countries,” says Becer. “We may very well see all four scenarios play out in different ways and at different times around the world over the next 30 years,” he says.
OUR PARTNER IN ANY POSSIBLE FUTURE(S)
Translink’s TOMORROW: 2050 future mapping series, a series of 5 reports which have already included unpacking the healthcare, industrials, TMT and food and beverage sectors, demonstrates our deep commitment to being a partner that our clients can rely on, now and in the future(s). The series celebrates our 50th anniversary, commemorating five decades of successful dealmaking.
As a world-leading corporate finance advisory firm with deep expertise in the food and beverage sector, Translink is perfectly positioned to be at the cutting edge of M&A developments. We have a team of 25 food and beverage experts across the world, with deep sector-specific experience and on the ground local knowledge across six continents. It is the group’s vast footprint that sets us apart.
We get the deal done.
To read the full F&B futures report and the other sector reports in the TOMORROW: 2050 series, visit https://www.translinkcf.com/50th-anniversary/