While
R&D labs search for the next PowerBar and ad agencies struggle
to find another "Whassup," U.S. food executives are finding that
the easiest way to raise revenues and value is by buying them. For
the 12 months ended June 1, 2001, the value of food industry mergers
topped $69.2 billion, according to Los Angeles-based Mergstat, a
global merger and acquisition information firm. To put that number
in perspective, for the five preceding years, the value of all food
industry mergers combined totaled only $50.1 billion.
Major
food companies are on an acquisition spree not seen since the deal-happy
1980s, but unlike the Reagan years (where agreements were consummated
for the sake of the big getting bigger) these deals are more strategic.
The current run of M&As are based on the principles of placing
a company in faster-growing, complementary food categories, expanding
in geographic areas where they are weak, and positioning themselves
better to counter consolidation on the supermarket side of the business
that has given even more clout to retailers.