Natural products industry investment surges

Natural products industry investment surges

The year 2015 is shaping up to be THE year of natural products industry investment and merger and acquisitions. Here's a midyear look.

Nutrition Capital Network (NCN), an organization that connects investors with high-potential growth companies in the nutrition and health and wellness industry, announced a continuing surge of investments in branded natural and organic food and beverage companies in 2015, in addition to phenomenal growth in financings in the emerging world of foodtech.

Overall transaction activity (acquisitions plus financings) in the nutrition and health and wellness industry totaled 235 transactions in the first two quarters of 2015, compared to annual totals of 372 in 2014 and 253 in 2013, according to the NCN Transaction Database.

Equity financings accounted for 133 transactions in Q1 and Q2 2015 and more than $3 billion invested in total. Merger and acquisition (M&A) deals totaled 102 in the first half of 2015 compared to 168 M&As in all of 2014. The total transaction value of just 13 of the 37 natural and organic food M&A deals for which purchase prices were announced was also more than $3 billion.

Technology races ahead in equity financings

NCN has recorded 32 equity investments so far in 2015 in Branded Food and Beverage (mostly natural and organic, but also including functional or medical foods targeting a particular health condition), almost matching the 33 Branded Food and  Beverage financings recorded in the whole of 2014. Highlights include investments of greater than $10 million in seven firms including Soylent, NatureBox and former NCN presenting company Celsius.

While financings slowed in Supplements and Ingredients in the first half of 2015, perhaps because of uncertainties in the supplement industry, the Technology segments are stealing the show again in 2015.

NCN’s five Technology segments accounted for 62 percent or 83 of 133 financing transactions recorded by the Nutrition Capital Network in the first six months of 2015, with Delivery Service and Apps & Info leading the way. Seven such firms have raised more than $100 million, and another 13 have raised between $50 million and $100 million in the nutrition and health and wellness industry so far in 2015, with delivery services like Instacart, Blue Apron, Sprig and Munchery in the USA and European-based global players like Hello Fresh, FoodPanda and Delivery Hero attracting attention in the tech-fueled food delivery niche.

“While app-enabled food delivery in the grocery, ready-to-cook and ready-to-eat categories is certainly more efficient than in the recent past, more convenient for consumers and almost universally more healthy and natural than other choices of food convenience, the foodtech battle going on the San Francisco Bay Area, New York, Berlin and other urban laboratories is still in its early stages,” said Grant Ferrier CEO and founder of NCN. “We welcome the activity, but perhaps not the hyper-activity that will lead to battles over a finite and affluent, albeit influential, set of customers….  Is it a bubble? Perhaps not yet, but the values these companies are getting means their consumer reach will have to be a lot broader if most of them are going to survive.”

Another segment of companies receiving more financing in 2015 is Biotech & Agtech with 15 transactions so far in 2015, compared to 11 in all of 2014. Highlights include microbiome-focused Seres Therapeutics, Allergen Research, agricultural drone developers DJI and 3D Robotics, each raising between $50 million and $100 million, and more nutritional ingredient-focused Pronutria and Gelesis raising $39 million and $22 million, respectively.

“We appreciate the high profile transactions that put the $260-billion U.S. nutrition and health & wellness industry in the mainstream financial press,” said Ferrier, “but the lifeblood of the industry, and indeed of NCN, is the smaller, high-growth companies, particularly in branded products and ingredient science, where a broader base of entrepreneurs are devoting themselves to bringing health and wellness to the masses.”

NCN’s transaction database tracked almost 50 deals where $5 million or less was invested in early-stage companies and another 30 where amounts were not disclosed. Of the 20 companies that presented their business plans and capital requests at NCN XV, NCN’s annual Fall Investor Meeting in San Francisco in November 2014, 10 had already obtained financing, including Dang Foods, Frontier Snacks, Green Zebra and Waiakea.

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