Vitamins Flashcards
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Thank you for the opportunity to present today
My name is James Rogers and I’m a Director in the European Consumer Team
I joined Piper Sandler with the acquisition of Stamford Partners last year
Before Stamford Partners I was at Rothschild for 10 years doing large-cap consumer.
Over the past 15 years I’ve developed a deep specialism in consumer M&A with a particular focus in drinks, transacting a number of deals in the Coca-Cola System, and also in snacking, including the recent sale of Burtons Biscuits to Ferrero.
But what I’m excited to talk to you about today is a huge growth opportunity in Vitamins.
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Vitamins, minerals and supplements sits at the confluence of consumer and healthcare
This is a vertical that offers:
1. more deals,
2. larger deals, and
3. in white space which is fully incremental to Piper Sandler.
It’s in the sweetspot of having higher margins than food, but lower regulatory burden than pharma and because it sits between consumer and healthcare, it is underserved by investment banks.
We know this from a recent and highly successful mandate for Piper - Adare Biome
Whilst other banks sent consumer bankers or healthcare bankers to the pitch
We won by truly understanding the target business and by identifying the value for buyers across the full industry spectrum whether in consumer, healthcare or chemicals.
Depth and breadth of expertise is how we win.
Vitamins
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Vitamins in Europe is a large and growing market
The growth is structural and underpinned by powerful drivers, including ageing demographics, rising obesity, and strong health trends
The market is growing at 4.5% year on year and this is the overall market, with some areas growing much faster, CBD +30%, Immunity products +35%,
Probiotics are growing consistently 20-30% per annum, driven by improving science and growing awareness of the importance of gut health
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And Europe is behind the curve.
There is strong adoption of supplements in the US, Australia and China, which gives rise to a significant catch-up consumption opportunity and adoption headroom in Europe.
Only half as many people in Europe consume Vitamins regularly vs the US.
The spend per capita is 2:1, the spend on probiotics is 6:1
And these are the same people, with the same needstates and similar affluent markets.
The US Vitamins market is twice the side of Europe with a population half the size.
Europe has to catch up.
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This is a highly fragmented market,
The top 10 Companies in Vitamins account for only 20% of the overall market
In OTC medicines the top 10 account for almost 40% of the market
In Beauty and Personal Care it’s 45%
And it’s highly localised, few players have been able to operate successfully across geographies in the way that they do in consumer products and in OTC drugs
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When we look into why that’s the case, the Vitamins market has historically been dominated by major pharma players, for whom Vitamins is merely a sideline.
If you have spare manufacturing capacity, it makes sense to make vitamins which you can distribute through your existing route to market.
But it has always been a sideline, never a strategic priority for these pharma players
In recent years this has been disrupted by the growth of digitally native start-up brands.
New brands, able to access and serve consumers directly through digital channels [1]have exploded onto the scene and presented new competition for the incumbents.
This competition has prompted pharma companies to exit the industry and revert to their core competency of drug development. They have been selling or spinning off their Vitamins and consumer health businesses to FMCG companies, who have the branding and marketing skillsets to drive growth in these brands.
So we are in the midst of a seismic shift of ownership of Vitamins brands with pharma divestment and CPG investment that is incredibly bullish for M&A
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And these brands have significant profit potential, with structurally high margins, higher than Pharma, CPG and sports nutrition
So CPG companies, in search of topline growth and margin accretion, are drawn towards these fast growing, high margin brands where they can deploy their superior brand building and consumer centric marketing expertise
Also no surprise that with, high growth, high margins, strong rationale for industry consolidation, this area is also attracting significant interest from private equity investors
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The number of M&A deals is growing each year
Particularly driven by private equity activity, creating platforms of scale, with those platforms then driving further consolidation.
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When we look at Vitamin deal volumes over the past 10 years, there have been higher deal volumes than frozen food, dairy, food ingredients, fresh produce and confectionery
€22B of mid-cap deal value over 10 years, an €800M fee pool
With our sector expertise we can target a disproportionate share of that
And as we build DCM and ECM capabilities in Europe there will be fee opportunities for product groups too.
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Vitamins offers a substantial M&A fee pool
The market is worth €28B in annual retail sales
Annual deal volumes in Europe are now €3bn euros per year
This represents an annual fee pool of over €100m
Piper capturing 5-10% of that market means a €5-10m fee opportunity
So a meaningful fee pool for Piper that we are now starting to tap into.
As well as offering further upside from US Vitamin deals and from the broader Consumer Health market.
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It’s an area where our high priority clients are interested and already active
We have done 15 deals for Unilever, but zero Vitamins deals
But this is a topic that they want to talk about because it’s a dynamic and exciting growth market, with high levels of innovation.
These strategics are exiting traditional food and moving into vitamins and supplements.
We need to move with them! And be a catalyst for that change
The US has been an innovation leader in supplements, with Europe a fast follower
European strategics have been acquiring fast growing US brands to accelerate their growth and build them into brands of multinational scale and this plays perfectly into Piper’s transatlantic model
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There are acquisition opportunities across both brands and contract manufacturing
Brands need investment to accelerate growth, contract manufacturers urgently need to consolidate
Half of what we do is selling nutrition brands
The other half of what we do is selling contract manufacturers
There is direct crossover with our existing food and beverage expertise meaning we are already credible in the space
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And strategics are paying full prices for assets
Average EV/Sales multiples of almost 4x net sales
21x EV/EBITDA
Double digit EBITDA multiples for contract manufacturers
Which means disproportionate M&A volumes and M&A fees relative to net sales value.
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No wonder then with such an attractive market there is competition from other advisors
But there is no reason to fear them,
with our depth and breadth of expertise, reaching across sectors and cohesively across geographies we have the right to win
And we have proven that.
On Adare biome we pitched against 5 other banks and we won
On Chapstick we pitched against 8 other banks and we won.
For our European team these are bigger deals, presenting a bigger fee opportunity, which is more profitable for the firm.
This is absolutely where we should be spending our time.
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I’m taking a structured approach to delivering on my business plan
Prioritise Relationships with Strategics – developing consolidator relationships which are key for winning sell-sides
Focus on Key Targets – Building a pipeline of actionable, probable, profitable and brand enhancing M&A opportunities
Leverage the Firm’s Strengths – working with the US consumer team which already has Vitamins credentials and relationships, adjacent sector teams and financial sponsors team where it can help us win
And I will continue to build my Broader Network
My approach is not to have semi-annual check-in meetings with these parties
But to focus on intense coverage of key strategics and top targets to contact at least on a monthly basis.
The more conversations I have,
the more information I learn,
the more opportunities to connect buyers with sellers
and generate fees for Piper
