1. Sector update
Heritage and Independent
Brands
Spring 2014
M&A at record levels for heritage and independent
brands
Demand for British heritage and independent food and drink brands is rising as
UK consumers prioritise brands defined by innovation, provenance and trust, and
international consumers are increasingly attracted to the values these brands
represent. This is supporting M&A with both trade and financial acquirers driving the
level of M&A activity to a post-2007 record high.
“We understand
the complicated
dynamics involved in
valuing heritage and
independent brands
given their higher
growth characteristics
and potential future
profitability.”
Simon Peacock
Head of Food Drink,
Catalyst Corporate Finance
Heritage and independent brands (“HI
brands”) are outperforming their global
competitors through innovation
HI brands have a track record of
reinventing product categories and
being highly responsive to consumers’
needs. This allows them to dominate
a product category and expand
distribution whilst simultaneously using
high levels of customer loyalty to stretch
an elastic brand into new categories.
This is attractive to large corporates
which struggle to replicate such flexible
innovation with customer loyalty in new
high-growth sectors.
Challenging economy and food scandals
are pushing consumers to trusted
brands
The challenging economic environment
has caused a flight to quality or value by
consumers. At the same time, scandals
such as horsemeat mean consumers
are prioritising provenance and the
traceability of ingredients. This is putting
pressure on brands in the middle ground
and leading to investment or disposal by
their large corporate owners.
British brands and brand values are
highly exportable
British brands are trusted internationally
and the values associated with
“Britishness” are well understood,
making HI brands internationally
competitive. Acquirers and investors are
attracted by the potential for significant
sales growth through international
roll-out.
High level of family ownership supports
strong long-term deal pipeline
Difficulties accessing significant funding
and succession issues mean many
family-owned brands will use MA to
support further growth. Both PE and
trade buyers will be active, with PE using
its skills to grow those brands that are
earlier in the investment cycle whilst
trade buyers target plug-in acquisitions
of more established brands.
Key observations
© Catalyst Corporate Finance LLP 2015
FdFood Drink

2. Heritage and independent brands are
outperforming their global competitors
At a macro level, the UK food and drink
sector is enjoying strong growth with
6.5% CAGR for the last three years
compared to below one percent GDP
growth, and exports have increased by
38% since 2009 to £18 billion in 2012.
The UK grocery market is worth over
£163 billion and forecast to grow by 18%
over the next five years to £193 billion,
with internet food shopping representing
an increasingly important share of the
market. Growth in these markets is
underpinned by developing trends such
as innovation, consumer polarisation
and provenance, which in turn are
favourable to the strong growth
of HI brands.
Heritage and independent
brands are achieving
brand leadership through
innovation
HI brands have a proven track
record of innovation and therefore
are capable of transforming product
categories through their creative
The rising demand for higher quality foods,
premium taste experiences and the impact of
recent high profile food scandals are increasing the
appeal of HI food and drink brands relative to the
big brands owned by large corporate competitors.
Source: Fame, calculated using latest publicly available turnover
use of ingredients, packaging and
responsiveness to consumers’ needs
and behaviours. This allows even very
young companies to build consumer
loyalty quickly, leverage brand elasticity
and consumer trends in new product
development (NPD) and grow rapidly,
see Figure 1.
Organic baby food manufacturer Ella’s
Kitchen was a leader in packaging by
offering its food in convenient, flexible
plastic pouches rather than traditional
glass jars. It now has an 18% share of
the UK baby-food market.
Innocent’s use of non-concentrated
fruits allowed them to communicate a
“better tasting” smoothie with higher
nutrition than its competitors. It now
has an 80% market share in the UK
and sells in 15 countries worldwide.
Innocent has successfully leveraged
its strong market position and brand
elasticity to extend into the broader
fruit-based drinks sector, flavoured
water and has developed products in
vegetable and noodle pots.
© Catalyst Corporate Finance LLP 2015
Figure 1: 2 year CAGR (turnover) of selected heritage and independent brands
16%
Fiddes Payne
0%
20%
40%
60%
60%
Ella’s Kitchen
33%
Tyrrells
25%
Innocent
18%
Soreen
14%
Bottlegreen
11%
Wilkin Sons
Limited
(Tiptree)
10%
Nairn’s
Oatcakes
9%
Walkers
Shortbread
The brand values which
HI brands exemplify
– authenticity, quality,
provenance, nostalgia,
freshness and innovation
– are even more attractive
to consumers in the
current environment. Such
characteristics increase
consumer confidence and
generate loyalty in the
brand values.

3. The prolonged challenging economic
environment and pressure on household
incomes has influenced consumers’
behaviour, creating a polarisation away
from the “middle-ground” grocery
retailers and brands with a flight to
quality or value. Aldi, Lidl and Waitrose
are achieving record market share at the
expense of the big four supermarkets,
despite the ‘premium’ of Waitrose
The recent horsemeat scandal has
influenced consumers’ shopping
habits, increasing the importance
they attribute to the traceability
and provenance of ingredients and
undermining their trust in some
retailers, as demonstrated by the fall in
being a very different proposition to the
discounters. The flight to value
or quality is putting increasing pressure
on the middle ground brands. Typically
owned by large corporates, they are
struggling to respond quickly to this
environment and owners such as
Unilever and chilled food manufacturer
Bakkavor are divesting non-core
businesses from their food portfolios.
sales of chilled and frozen convenience
meals containing meat reported by the
largest supermarkets. Consumers are
showing higher levels of trust in
locally-sourced and authentic
ingredients, and low levels of processing
typical of HI brands.
Polarisation between quality and value retailers
Consumers prioritising provenance after food scandals
© Catalyst Corporate Finance LLP 2015
“In today’s difficult
economic climate,
Fiddes Payne’s 5 year
CAGR of 16%
reflects the powerful
combination of high
product quality,
excellent packaging
innovation and
an ambitious
management team.
International business
represents 25%
of sales reflecting
British skills in
quality, packaging
design and the
importance of strong
brands.”
Iain Macpherson, Managing
Director
Fiddes Payne
British brands are trusted
internationally. “Britishness” is
strongly associated with heritage
and continuous innovation. The
appeal of these values to consumers
internationally is supporting the
growth of those HI brands that
also appeal to consumers’ taste
preferences in different countries,
see Figure 2. The potential to achieve
significant sales growth outside the
UK is driving MA.
Tyrrells The £40 million acquisition
of premium crisps brand Tyrrells in
2008 by Langholm Capital enabled
significant investment to be made in
capacity to enable broader distribution
in the UK and overseas, new product
development and brand management.
Overseas sales increased from 12%
of total sales in 2009 to 17% in 2012.
Tyrrells has recently been acquired by
Investcorp for £100 million.
Fever-Tree LDC’s £98 million
investment in premium tonic water
and mixers brand Fever-Tree will help
to strengthen the brand’s presence
in the UK and Spain, accelerate
expansion into the US and help drive
international growth.
Clipper Teas Royal Wessanen
acquired Clipper Teas in 2012. Whilst
Clipper is the UK leader in organic
and fair trade teas, it successfully
stretches its brand across tea, coffee
and hot chocolate. Wessanen is
Spotlight: British brand values are highly exportable
Source: Fame
TyrrellsElla’s
Kitchen
Thomas
Tunnock
Clipper
Teas
17% 16%
19%
13%
17%
8%
13%42%
2010 2012
Figure 2: Overseas sales as a
proportion of total sales is rising for
heritage and independent brands
leveraging its European network
to grow Clipper, with roll outs in
France, Netherlands and Germany
in 2013. Clipper has contributed over
h1 million in revenue in year one.

4. Acquirers have different MA objectives
Access pioneering brands
Large corporates often struggle to
replicate the product and marketing
innovation and associated brand loyalty
that HI brands such as Innocent, Gu
and Bottlegreen Drinks achieve. Large
corporate brands can lack credibility
with consumers looking for a more
dynamic or trusted brand. As such,
some large corporates are keen to
acquire leading brands with established
heritage, which use authentic
ingredients with provenance, and which
have a loyal customer base in order to
access high-growth opportunities.
Coca-Cola has made a number of
strategic acquisitions to capitalise on
health and wellness trends. In 2007,
the company made the £2.1 billion
acquisition of Glaceau to increase its
presence in the fast-growing
enhanced-water and energy-drink
markets. This was followed by the
£100 million acquisition of Innocent
in 2013. Entrepreneurial brands can
leverage the resources of their large
corporate owners to scale their brands
in their domestic markets and expand
internationally. The challenge for owners
like Coca-Cola is to continue new
product development which maintains
the core aspirational brand values
customers are willing to buy in to.
US natural and organic food
manufacturer Hain Celestial
recently acquired Ella’s Kitchen. The
acquisition complements their Earth’s
Best line of organic foods for infants.
In conjunction with Ella’s Kitchen’s
High levels of innovation by HI brands, consumer
polarisation and the importance of provenance are
supporting rising levels of MA. Acquiring these brands
enables buyers to access higher growth opportunities,
new sectors and new geographies.
founder, Hain will use its distribution
platform to grow the brand in the US and
EU, and leverage Ella’s Kitchen’s brand
elasticity to expand in the UK with new
feeding and personal care products.
Extend product range
Acquisitions are being driven by the
strategic need to increase the consumer
offering and broaden portfolios of
HI brands.
Blackstone-owned Tangerine
Confectionary, the largest UK-owned
sugar confectionary and popcorn
manufacturer, has been a serial
acquirer of privately-owned heritage
brands. The company has made four
acquisitions since 2006, including the
acquisition of two of the UK’s oldest
brands, Smith Kendon Travel Sweets
and York Fruits.
In 2012, Hain Celestial made the
£202 million tactical acquisition of
heritage jam brand Hartley’s from
Premier Foods to complement its
wider condiments portfolio. Hartley’s
has a heritage which dates back
to 1871.
SHS Group, the FMCG holding
company and owner of sparkling juice
brand Shloer, acquired Bottlegreen
Drinks from Piper Private Equity in
2011.SHS was attracted to the
brand’s strength, international
growth potential and brand elasticity.
Bottlegreen has expanded from the
original elderflower cordial to over 22
different varieties including flavoured
sparkling spring water and tonic water.
© Catalyst Corporate Finance LLP 2015
Overseas acquirers
targeting leading brands
HI brands are attracting
high levels of interest
from overseas acquirers.
Bright Food, one of
China’s largest food
groups, acquired 60% of
Weetabix for £1.2 billion
in 2012 from Lion Capital.
Increasing urbanisation
and higher disposable
incomes are creating
demand for Western-style
breakfast diets and brands
in China. Japan’s Suntory
acquired the Ribena and
Lucozade brands from
GlaxoSmithKline to offset
a challenging domestic
consumer market driven by
an ageing population.

5. High levels of family ownership creating
pipeline of acquisition opportunities
Ownership can stretch back over
generations, especially for the
larger (and probably older) brands
like Warburtons, the largest baker
in the UK which is run by the fifth
generation. Whilst some companies
want intergenerational ownership, there
will be an increasing flow of companies
looking to sell or secure investment as
new generations look to crystallise value
or to grow brands (see Spotlight below).
Deal volumes are at record levels
Trade buyers account for the majority
of activity (see Figure 4) and dominate
Low start-up costs, established production methods
and accessible consumers and routes to market mean
that food and drink brands with the values associated
with heritage and independence still have a high level
of private and family-ownership because the early
barriers to entry are low.
acquisitions of those brands with
turnover greater than £20 million,
see Figure 5. Large UK and overseas
buyers are attracted to the strategic
opportunities these brands offer and
are targeting manufacturers with
strong and growing brand equity,
brand elasticity, a successful record
in developing new products, and the
potential for international growth.
PE is typically investing in HI brands
with lower turnover, and is attracted to
brands with a high level of consumer
loyalty, innovative new product
development record and growth
potential. PE use their skills
to invest in professionalising
distribution capabilities in
existing and new routes to
market, developing branding
and marketing, and supporting
capacity for NPD.
Specialist mid-market
houses have established
a strong record in growing
entrepreneurial brands. For
example, Langholm Capital,
which owns Barts Spices
and Purity Soft Drinks, grew
Tyrrells Crisps significantly,
doubling turnover between
2008 and 2013 before exiting to
Investcorp. Piper Private Equity
invested in Bottlegreen in 2007
when turnover was £8 million;
sales had increased to £13
million at exit in 2011.
© Catalyst Corporate Finance LLP 2015
Family-ownership in food and drink
businesses is strong but with high
price expectations, it can take time
for a family to agree their succession
strategy or even exit.
Figure 3 illustrates that 60% of MA
transactions involving family-owned
HI brands since 2006 were executed
by the second generation or older. In
the UK SME sector overall, around a
third of family firms tend to be passed
onto the second generation and a tenth
reach the third generation. Hence the
majority are sold or closed down well
before reaching the later generations.*
Patak’s Foods and Cadbury are well-
known examples of where third and
fourth generation companies have sold
to large listed global trade buyers.
US-based Kraft Food acquired 168 year
old Cadburys in 2009 for £13.7 billion
when turnover had reached £5.4 billion.
Similarly, Associated British Foods plc
acquired Patak’s for £125 million in
2007 when turnover was almost
£50 million.
Spotlight: Multi-generational ownership of
brands supports long-term deal flow
Source: Mergermarket
*The UK Family Business Sector,
Institute for Family Business, 2008
Figure 3: 60% of family-owned
heritage and independent
brands are sold by second
generation or older
33%
20%
7%
0%
10%
20%
30%
40%
First Second Third Fourth
40%
Generation

6. Private equity has a successful exit record
Lydian Capital Partners’ Wellness
Foods, which owns Rowse Honey,
acquired Dorset Cereals from
Langholm Capital for £50 million in
2008, representing a four-fold increase
on Langholm’s original investment.
Blackstone’s 2011 investment in
Tangerine Confectionery marked a
3.8x return on investment for Growth
Capital Partners at exit.
PE has made a number of sales to
trade. For example, Lion Capital
sold 60% of Weetabix to Bright Food
for £1.2 billion having acquired the
leading branded cereal manufacturer
for £677 million in 2004. The SHS
Group’s acquisition of Bottlegreen was
an exit for Piper and Royal Wessanen’s
acquisition of Clipper Teas was an exit
for Flemings.
PE has a successful record helping to grow heritage
and independent brands and then exiting well
Source: Mergermarket *September Source: Fame *Where disclosed
Overseas acquirers will
pay more
Despite the challenge of independent
brands, large global and US firms
have performed well over the last
three years and have outperformed
companies in Europe due to the robust
and mature nature of the overall
industry in a challenging economy.
Valuations of European companies
fell in mid 2011 when the Eurozone
debt crisis was at its peak. Combined
with a strong US dollar, the European
market will look relatively cheap to
US buyers, allowing them to pay more
than domestic acquirers.
Brands that demonstrate strong
strategic importance have proven that
a significant premium can be achieved
on typical profit multiples of more
established quoted food companies.
© Catalyst Corporate Finance LLP 2015
3
4
5
3 3
4
6
7
2
3
1 1 1 1 1
5
0
1
2
3
4
5
6
7
2006 2007 2008 2009 2010 2011 2012 2013
YTD*
PE buyerTrade buyer
9
17
7
6
£20 million
£0m
£5m
£10m
£15m
£20m
£25m
£20 million
PE buyerTrade buyer
Figure 4: Number of deals since 2006 Figure 5: Turnover in year of deal (£m)*
“British brands stand
out for their quality
and authenticity
in the UK and
internationally. We
are working with
forward-thinking
brands like Patisserie
Valerie, GAIL’s
Artisan Bakery and
The Bread Factory
to strengthen
their businesses
and expand their
markets. Consumers
are rewarding the
quality of their
products and service
with high levels of
loyalty.”
Luke Johnson
Chairman, Risk Capital Partners

7. Date UK Target Target Description Acquiror Country Deal
Value(£m)
Sep-13 Whitworths Limited Manufactures fruit and nut snacks and nutritional food supplements Equistone Partners UK 90.0
Aug-13 Tyrrells Potato Crisps Limited Produces and supplies potato chips Investcorp UAE 100.0
May-13 Ella's Kitchen Group Limited Manufactures and distributes premium organic baby food Hain Celestial Group USA nd
Mar-13 Fever-Tree (49% Stake) Tonic and spirits manufacturer Lloyds TSB Development Capital Ltd UK 98.0
Feb-13 Innocent Ltd (Undisclosed Stake) Manufacturer of soft beverages The Coca-Cola Company USA 100.0
May-12 Weetabix Limited (60% Stake) Produces and sells breakfast cereals and bars Bright Food (Group) Co., Ltd China 1,200.0
Apr-12 Purity Soft Drinks Limited Producer of soft drinks Langholm Capital LLP UK 10.0
Mar-12 Clipper Teas Limited Tea and coffee company Royal Wessanen nv Netherlands nd
Feb-12 Speciality Desserts Ltd Provides desserts for the food service industry Europeenne des Desserts France nd
Nov-11 Fray Bentos Tinned pie brand Baxters Food Group Limited UK 30.0
Jul-11 Tangerine Confectionery Limited Manufactures sugar confectionery and popcorn products Blackstone Group L.P. USA nd
May-11 Bottlegreen Drinks Company Ltd Manufacturer and distributor of branded adult soft drinks SHS Group Ltd UK nd
Feb-11 Big Bear Group Plc Food company Raisio Group Plc Finland 80.4
Jul-10 Rachel's Organic Dairy Producer of organic dairy products Groupe Lactalis S.A. France nd
May-10 Bart Spices Limited Supplies herbs and spices Langholm Capital LLP UK nd
Apr-10 Innocent Limited (40% Stake) Manufacturer of soft beverages The Coca-Cola Company USA 127.6
Nov-09 Cadbury Plc Manufacturer of beverages and confectionery products Mondelez International, Inc USA 13,730.7
Jun-09 Elizabeth Shaw Ltd Chocolate manufacturer Imagine Capital AS Norway nd
May-09 Salads To Go Ltd Maker of prepared leaf salads Groupe Florette France nd
Jun-08 W Jordan Son (Silo) Limited Supplier of breakfast cereal, bars and wheat bran Associated British Foods Plc UK nd
Apr-08 Tyrrells Potato Crisps Limited Produces and supplies potato chips Langholm Capital LLP UK 40.0
Mar-08 Dorset Cereals Limited Breakfast cereals producer Wellness Foods Limited UK 50.5
Mar-08 Red Mill Snack Foods Manufacturer of snacks Tayto Crisps Limited Ireland nd
Dec-07 Clipper Teas Limited Tea and coffee company Fleming Family Partners Ltd UK 26.6
May-07 Patak's Foods Ltd Indian food ingredients company Associated British Foods Plc UK 125.0
Selected transactions
Source: Capital IQ
© Catalyst Corporate Finance LLP 2015
Contact us
If you would like to discuss this report in more detail or the opportunities for your business, call +44 (0) 20 7881 2960.
Simon Peacock
Director
simonpeacock@catalystcf.co.uk
Simon has over
15 years of financial
management and
corporate finance
experience gained
within both industry
and most recently professional
services. Simon has completed a
number of deals in the Food Drink
sector including the sale of Soreen to
Samworth Brothers, the sale of Red
Mill Snacks to Tayto Group and the sale
of Salads to Go to Soleco UK.
Steve Currie
Partner
stevecurrie@catalystcf.co.uk
Steve has over 20 years’
corporate finance
experience working
at private equity and
corporate advisory
firms. He leads our
work focusing on financial sponsors
and is a member of our Consumer
sector team. He has completed
a number of deals in the sector
including the management buy-out
of Farrow Ball.
Mark Farlow
Partner
markfarlow@catalystcf.co.uk
Mark has over
25 years’ corporate
finance experience.
He has a strong record
and reputation as a
Travel and Leisure
sector specialist and has completed
a number of deals including the
management buy-out of Esprit Ski
and, more recently, Amber Travel and
the secondary management buy-out
of Victoria Travel Group.

8. Selected Catalyst Food Drink sector deals
Catalyst Corporate Finance LLP is a limited liability partnership registered in England Wales (registered number OC306421) Registered Office: Bank House, 8 Cherry Street, Birmingham, B2 5AL
Catalyst Corporate Finance LLP is authorised and regulated by the Financial Conduct Authority (number 478406)
www.catalystcf.co.uk
London
5th Floor
12-18 Grosvenor Gardens
London SW1W 0DH
T +44 (0) 20 7881 2960
Birmingham
16th Floor, Bank House
8 Cherry Street
Birmingham B2 5AL
T +44 (0) 121 654 5000
Nottingham
21 The Triangle
ng2 Business Park
Nottingham NG2 1AE
T +44 (0) 115 957 8230
© Catalyst Corporate Finance LLP 2015
Smart advice Global reach
Catalyst advises business owners and management
teams on:
Company sales
Management buy-outs and buy-ins
Company acquisitions
Raising private equity capital
Raising and refinancing debt capital
Our international partnership is present in 50 cities
worldwide and provides:
Access to overseas buyers
Identification of overseas targets and acquisition
execution
International MA research
Local insight into MA culture and likely tactics
Sale to
Sale to
Sale to
Sale to
Sale to
Acquisition of