An index of the major US natural and organic food companies has enjoyed an unprecedented 229 per cent growth in the past three years.
"We are very bullish on what is happening," said David Thibodeau, managing director of investment banking for the Adams Harkness' Investment Banking Group. "We believe the sector will continue to attract growth and will continue to attract strong investment interest. It's a great time to be in this space, and we're going to do well in the next several years."
The Natural and Organic Index includes such companies as Lifeway, Hansen, Whole Foods, The Hain Celestial Group and Spectrum Organic Products.
Another index monitored by the group is the Healthy Living Index, which includes 40 major public companies with a role in the industry. Since 2000, it has risen 156 per cent, outpacing all other indexes in the US stock market. Within that index, ingredients suppliers like Balchem and Martek rose 107 per cent since 2000, while supplements companies rose 215 per cent.
"When you compare this to other indexes — the Dow rose 0.11 per cent, the Russel rose 29 per cent, the Nasdaq rose 40.2 per cent since 2002 — these are remarkable gains. The Street loves natural foods companies today."
In his work, Thibodeau focuses on mergers, acquisitions and financings in the nutrition industry. Among the recent transactions he has overseen were Pure World's $36.8 million sale to Naturex SA, and Opta Food Ingredients' $25 million sale to Stake Technology Ltd.
Overall, 2004 was a busy year for major sales and buyouts. "What we are seeing for the first time is strategic players entering the sector," he said. "US investors are looking for good markets — and the nutrition business is one of them."
In 2004, there were 44 mergers and acquisitions in the ingredients sector. Among the most active strategic buyers were SunOpta (4), Cargill (2), Naturex (2) and Kerry (2). On the supplements side, there were 53 mergers and acquisitions in 2004. The most active players were NBTY (2), Ideasphere (1) and Naturade (3).