Highlights include:
- Evolving consumer demands: Formulators face challenges adapting to growing consumer demand for functional benefits, sustainability, and clean-label claims in food products.
- Fragmented market: The food ingredient industry is diverse, with large corporations coexisting with smaller, niche companies, making it a fragmented sector.
- Consolidation trends: Larger companies continue to acquire smaller ones to reduce competition, access new markets, and meet sustainability and innovation demands.
- Valuation stabilisation: After a dip in trading multiples in 2022 due to economic factors, market valuations are expected to stabilise in the near future.
- Major mergers: Significant mergers like IFF/DuPont and DSM/Firmenich aim to combine innovation with scale, reshaping the industry toward sustainable ingredient solutions.
Mark Lynch, Partner at Oghma Partners, said: “Formulators in the food and beverage industry face increasing challenges in meeting evolving consumer demands. The global economic environment, paired with shifting preferences towards functional benefits, clean-label claims, and sustainability, requires companies to adapt quickly. Suppliers and formulators must navigate the complexities of reformulating products while maintaining optimised value and staying attuned to consumer needs.
“Additionally, the fragmented nature of the ingredients market, where specialty players coexist with commodity processors, creates opportunities for consolidation. Larger companies continue to acquire smaller, innovative firms offering natural, sustainable products to align with market demands. This trend is reinforced by M&A activity, particularly in Europe, driven by the need for geographic growth and enhanced sustainability practices. Despite recent dips in market valuations, Oghma anticipates stabilisation as the earnings outlook improves, reflecting a renewed confidence in the future of this dynamic industry.”
