Post-Expo West Investor Activity & Takeaways

As you’ll read from the many Expo West recaps online, this year’s event was as usual a whirlwind and even clocked in as the largest show to date with over 70,000 attendees and 3,200 exhibitors.

As a leader of our M&A diligence team, my focus during trade shows is to connect with industry investors. We regularly connect over Zoom and email, but Expo is one of the few opportunities to meet in person, which can feel like a lost art these days. It provides a great chance to check in on how investors feel about the industry and even get an idea of what they are looking for to see if we can help make introductions. I’ve noted a few of our team’s personal takeaways from this year’s Expo below.

The market is active!

A year ago, we were hopeful there would be more activity than we saw in 2023 but hadn’t fully seen the signs. This year, as was the case throughout most of 2024, we are continuing to see investors, small and large, become more active. To back these thoughts, JPG has had increasing numbers of due diligence project asks over the last year.

Big transactions like we’ve seen with Olipop & Poppi, Siete Foods, Simple Mills and LesserEvil are top of mind for everyone. These transactions serve as a driving force of excitement not only for financial returns, but as a reminder of how CPG can change the cultural landscape in the US. However, the renewed activity levels aren’t without other new changes.

Branded CPG deals are challenging.

Gone are the days of 2021 where brands could raise money without a concrete path to profitability. The “grow first, profit later” mindset is dead. We observed that investors are being more stringent and brands who don’t have the right answers aren’t going to be able to raise.

Those who have successfully pivoted to profitability are reaping the rewards, often getting their pick of interested investors. We are even seeing these profitable branded players be less inclined to raise equity, as the value-add from investors isn’t always enough to offset the dilution. This makes “value-add” investors more important, as investors need to prove their worth more than ever to access the best deals.

This is nothing new from 6-12 months ago, but we’re glad to see that it seems like the capital raising landscape is in a much healthier, more sustainable place.

Different types of strategies continue to pop up.

Secondary transactions seem to continue to happen. Founders are looking for liquidity for businesses they launched 5-10 years ago, and investors are seeing their fund horizons approach rapidly and want returns.

We are also seeing some investors move into other, less typical, areas such as supply chain, manufacturing and product testing. Obviously, the fund must have a flexible mandate to do this, but I’ve heard it described as a way to ride the wave of the market without having to pick specific winners.

At the Private Equity level, roll ups, roll ups, roll ups. PE continues to buy businesses and look for rollups to add margin and growth.

Once again – more scrutiny!

In addition to the microscope on financials, investors are asking questions that go above and beyond what was being asked 5 years ago.

Can you go into the facility to verify that new machinery can deliver the promised profit gains? Can you assess the leadership team’s ability to navigate growth? Can you ensure a co-man can handle the product / volume needed this year? Are cheaper or better co-mans or ingredient suppliers available? How will tariffs impact a product made in another country or impact my sales to another country? Are there any regulatory concerns with the product labeling? What other drivers of growth are there for a business, beyond what is in the plan? Are there any environmental health and safety concerns with the way this business operates or plans to operate?

All the above are questions we’ve seen investors ask consumer brands and manufacturers over the past 6 months and it doesn’t look like this level of review is going away any time soon. Our diligence team continues to see smaller funds willing to pay for various levels of diligence to ensure nothing is being missed ahead of making a deal.

In summary,

Consumer innovation isn’t going away, and neither are the investors that fund it. Big transactions in the news have helped re-energize the community on both sides, with founders now more focused on building scalable, profitable businesses and investors looking for more opportunities outside of the box and asking the right questions ahead of writing a check.

This is an exciting time for the CPG industry and we at JPG want to help both founders and investors succeed! Our M&A diligence team works with investors of all sizes to help them quickly & efficiently identify risks, deal-killers and areas of opportunity for food, beverage, VMS and pet businesses. We primarily handle projects focused on Operations, Safety & Quality, Commercial and Environmental Health & Safety.