Private equity deals booming for baking industry

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Private equity deals booming for baking industry

16 Sep 2021

Joanie Spencer

Since 2008, Joanie Spencer has covered the retail and wholesale sides of the baking industry.
Serving associations such as the American Society of Baking (ASB) and BEMA, Joanie is also in demand as an industry presenter on bakery operations and trends. She holds a bachelor’s degree in communication from Rockhurst University and a master’s degree in journalism from the University of Missouri.

When she’s not running or playing soccer, Joanie spends her time with her husband and 11-year-old son.

WASHINGTON, DC — In the past 18 months, much has changed for the commercial baking industry. From the need to pivot from foodservice customer shutdowns in early 2020, to the run on grocery shelves for staples like bread, to changing snacking habits and eating at home, the industry has been busier than perhaps any other time in history.

And that is catching investors’ attention as private equity sees an uptick for baking companies.

At the American Bakers Association (ABA)’s NextGen Baker Virtual Leadership Forum, being held Sept. 14 and 16, Cyrille Filott, global strategist, consumer food at Rabobank, outlined how increased private equity investments is impacting the baking industry.

“The broader investment community — or, in this case, the slightly narrow private equity community — has shown an interest and seized the momentum that the sector has generated throughout COVID,” Filott said.

Although baking companies’ valuations are strong in the absolute sense, it’s the relative valuations that are landing the bakery sector on the private equity radar, according to Filott.

“It’s not only the absolute valuation but also compared to other sectors,” he said. “I think the valuation of the bakery sector is relatively okay compared to other sectors with very high valuations. And private equity firms need to deploy their capital.”

Filott predicted even more growth on the horizon for the baking industry.

“People believe it can grow from here,” he said, “that the margins can go higher, and cash-flow generation can go up. And, therefore, it’s a good investment.”

“The broader investment community — or, in this case, the slightly narrow private equity community — has shown an interest and seized the momentum that the sector has generated throughout COVID,” said Cyrille Filott, global strategist, consumer food at Rabobank.

Filott, who co-presented with JP Frossard, Rabobank VP and consumer food analyst, noted that the industry’s deal activity directly related to shifts pertaining to people (consumers), products and places where baked goods are being purchased and consumed.

“I refer to the private equity activity as the ‘fourth P,’” he said.

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