Tariffs reshape food & drink M&A: Key trends in 2025 – FoodNavigator-USA.com

Analysis of Food and Drink M&A Trends in Relation to Sustainable Development Goals (SDGs)

Overview of Current M&A Activity

• Mergers and acquisitions (M&A) in the food and drink sector have declined year-over-year, influenced by tariff uncertainties and global trade tensions.
• New US import tariffs and retaliatory measures have disrupted supply chains, particularly affecting trade with Canada, Mexico, and China.
• Distributors outperform other segments due to their flexible sourcing and logistics capabilities.
• Strategic buyers and private equity firms focus on companies with strong domestic supply chains and resilience to tariffs.
• Large corporations are expected to release brands onto the market as they rationalize their product ranges.

According to Capstone Partners data, food and drink business M&A volumes have decreased by 27 deals year-to-date, reflecting market uncertainty that has cooled spending decisions. Many potential acquirers remain hesitant due to the fallout from tariff delays and policy reversals.

Impact on Supply Chains and SDG Alignment

The food industry is reassessing supply chain strategies in response to tariffs and trade tensions, with a growing emphasis on diversification rather than brand acquisition. This shift aligns with SDG 12: Responsible Consumption and Production by encouraging sustainable sourcing practices and reducing dependency on vulnerable supply chains.

Brian Boyle, Managing Director at Capstone Partners, highlights that:

1. Alternative sourcing and supplier diversification are becoming priorities for food sector participants.
2. Food producers may modify product formulations to reduce reliance on costly raw materials, substituting cheaper or domestically sourced ingredients to mitigate tariff impacts.
3. Packaging adjustments are also considered, addressing tariffs on aluminum and steel, which affect canned goods.

Stresses on Food and Drink M&A and Economic Implications

Geopolitical tensions have added pressure on dealmakers, with only 41 M&A transactions recorded in the first quarter of the year, compared to 68 in the same period of 2024. Branded and processing segments experienced significant declines of 28% and 62%, respectively.

This reduction in M&A activity reflects consumer trends, where increased prices and declining sales volumes in consumer packaged goods have influenced market behavior, consistent with SDG 8: Decent Work and Economic Growth by highlighting economic challenges within the sector.

Conversely, distribution businesses have shown resilience, with a slight increase in deals year-to-date. Distributors benefit from steady margins and near recession-proof qualities, as they primarily handle finished goods and are less affected by tariff disruptions.

Future Outlook and Strategic Responses

Despite current market challenges, industry leaders maintain cautious optimism regarding future M&A activity. Mondelēz International’s CEO Dirk Van de Put and General Mills’ CEO Jeff Harmening have indicated ongoing interest in acquisitions, although pricing remains a concern.

Large corporations, such as Unilever, are streamlining portfolios to focus on core brands, potentially leading to increased availability of divested products in the market. This strategy supports SDG 9: Industry, Innovation, and Infrastructure by promoting efficient business models and innovation through targeted acquisitions.

Brian Boyle notes that these smaller, strategically aligned acquisitions reduce pressure on research and development departments and are financially more viable, fostering sustainable growth within the sector.

Summary of Key Points Related to SDGs

• SDG 12 (Responsible Consumption and Production): Emphasis on supply chain diversification and sustainable sourcing to reduce environmental and economic risks.
• SDG 8 (Decent Work and Economic Growth): Impact of economic uncertainty on M&A activity and consumer purchasing behavior.
• SDG 9 (Industry, Innovation, and Infrastructure): Portfolio rationalization and targeted acquisitions supporting innovation and efficient industry practices.
• SDG 17 (Partnerships for the Goals): Collaboration between strategic buyers and private equity to strengthen domestic supply chains and tariff resilience.

1. Sustainable Development Goals (SDGs) Addressed or Connected

1. SDG 2: Zero Hunger
   • The article discusses food supply chains, sourcing, and production challenges, which relate to ensuring food security and sustainable agriculture.
2. SDG 8: Decent Work and Economic Growth
   • Mergers and acquisitions (M&A) trends in the food and drink sector impact economic growth, business development, and employment.
3. SDG 12: Responsible Consumption and Production
   • Focus on supply chain diversification, reducing reliance on costly raw materials, and product formulation changes to lower tariffs relate to sustainable production practices.
4. SDG 17: Partnerships for the Goals
   • The article highlights trade tensions and global supply chain disruptions, emphasizing the need for international cooperation and partnerships.

2. Specific Targets Under Those SDGs Identified

1. SDG 2: Zero Hunger
   • Target 2.3: By 2030, double the agricultural productivity and incomes of small-scale food producers through secure and equal access to resources and markets.
   • Target 2.4: Ensure sustainable food production systems and implement resilient agricultural practices.
2. SDG 8: Decent Work and Economic Growth
   • Target 8.2: Achieve higher levels of economic productivity through diversification, technological upgrading, and innovation.
   • Target 8.3: Promote development-oriented policies that support productive activities, decent job creation, and entrepreneurship.
3. SDG 12: Responsible Consumption and Production
   • Target 12.2: Achieve sustainable management and efficient use of natural resources.
   • Target 12.5: Substantially reduce waste generation through prevention, reduction, recycling, and reuse.
4. SDG 17: Partnerships for the Goals
   • Target 17.11: Significantly increase the exports of developing countries, in particular with a view to doubling the least developed countries’ share of global exports.
   • Target 17.16: Enhance the global partnership for sustainable development.

3. Indicators Mentioned or Implied to Measure Progress

1. SDG 2 Indicators
   • Indicator 2.3.1: Volume of production per labor unit by classes of farming/pastoral/forestry enterprise size.
   • Indicator 2.4.1: Proportion of agricultural area under productive and sustainable agriculture.
2. SDG 8 Indicators
   • Indicator 8.2.1: Annual growth rate of real GDP per employed person.
   • Indicator 8.3.1: Proportion of informal employment in non-agriculture employment.
   • Number of mergers and acquisitions (M&A) deals as a proxy for economic activity and business growth in the food and drink sector (implied).
3. SDG 12 Indicators
   • Indicator 12.2.1: Material footprint, material footprint per capita, and material footprint per GDP.
   • Indicator 12.5.1: National recycling rate, tons of material recycled.
   • Changes in sourcing strategies and product formulations to reduce raw material costs and tariffs (implied indicators of sustainable production adjustments).
4. SDG 17 Indicators
   • Indicator 17.11.1: Developing countries’ and least developed countries’ share of global exports.
   • Indicator 17.16.1: Number of countries reporting progress in multi-stakeholder development effectiveness monitoring frameworks.
   • Trade volume and tariff impacts on supply chains (implied indicators of partnership and trade effectiveness).

4. Table of SDGs, Targets, and Indicators

Source: foodnavigator-usa.com