50 fastest growing OOH food and drink firms in UK

12 October 2015 Consultancy.uk

BrewDog, Bill's Restaurants and Ed's Easy Diner are according to new research the fastest growing out-of-home food and beverage companies in the UK.

In a recent report by AlixPartners, titled ‘Growth Company Index 2015’, the global consultancy ranks the fifty fastest growing out-of-home (OOH) food and beverage companies within the UK market. To qualify for the index companies need to show a turnover of at least £3 million and profits of at least £300,000 in their latest accounts. For the index, profits are calculated as the firm’s EBITDA plus the director remuneration added back in. Key reason for adding profits back in is that 70% of company profits can be removed at private companies to reward directors.

The analysis reveals that private equity has a major stake in the UK’s fastest growing OOH businesses – 42% of ownership is in the hands of venture capitalists and other external investors. Family businesses make up the second largest segment at 30%. 24% are private/owner operated, while 2% of business consist of overseas subsidiaries.

Top 10 fastest growing OOH food and drink firms

Top ten
BrewDog, a crowd-funded specialty beer company that has expanded rapidly in recent years, leads the index, up from the number four spot a year earlier. BrewDog’s revenue grew from £5.9 million to £18.1 million over the two year index period, while two-year profit CAGR stands at 134%. Bill's Restaurants comes in at number two, moving up one spot. The company has seen its two-year profit CAGR hit 122%, with profit of £5.9 million on revenue of £53.9 million. The number three spot is taken by Ed's Easy Diner, dropping from number 1 last year. The company’s two-year profit CAGR reaching 108%, while it has seen revenues grow from £6.0 million to £17.6 million over the past two years.

Hawksmoor, the first of the private equity owned companies in the top ten, moves down two spots to number four. The company has seen strong revenue growth at a 55% CAGR from £10.6 million to £25.6 million, while profits grew 80% over the two year period. Loungers takes the number five spot, also PE backed, jumping from the number 19 spot. The company has performed well in recent years, revenue increased at a 50% CAGR from £15.1 million to £33.7 million and profit increased at a 67% CAGR from £1.3 million to £3.7 million.

Top 11 - 20 fastest growing OOH food and drink firms

The sixth sport is taken by Stonegate, new to the ranking this year, which booked impressive two-year profit CAGR of 66%, from £18.3 million to £50.4 million. Number seven Le Bistrot Pierre has seen its profitability increase 56% over the two years, while Admiral Taverns, also new in the list at number 8, has enjoyed a 49% increase in profits over the index period. Be At One jumps from spot 41 to number 9, with its two year profit CAGR at 45% on the back of the acquisition of 111 pubs from Heineken UK last year. Krispy Kreme re-enters at number 10 with a turnover of £52.4 million and a profit of £9.4 million.

Top fifty
The rest of the top fifty include a wide range of store and types, from boutique family owned pubs to large corporate chain-stores. The research highlights however that the stores growing the most in profitability are predominantly private equity backed.

The top twenty welcomes Faucet Inns at number 11, while Tortilla drops from number 5 to number 12. Robinson's increases its profitability to move from number 37 to number 13, while Hix Restaurants makes the list for the first time at number 14. ETM Group too does well, moving from number 34 to number 15.

Top 21 - 50 fastest growing OOH food and drink firms

A new contender in the top 20 is Boston Tea Party at number 21; Davy's comes in at number 24, dropping from 14 last year; TGI Friday's loses ground, falling from spot 21 to 28; Beds and Bars on the other hand increases its position from 48 last year to 30 this year. The top 30 to 50 show little growth in profit over the past year, with between 1% and 10% growth, and include names like Hall & Woodhouse new to the list at number 31, Yo! Sushi re-entering at number 42, Wasabi at number 47 and Pho rounding off the top 50.


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Consumer goods start-ups grow interest from venture capital

23 April 2019 Consultancy.uk

Funding the latest consumer goods start-up has been a real money-spinner for venture capitalist firms, with a number of $1 billion companies – or unicorns – having emerged in the space in recent years. New analysis has explored the resulting corporate consumer products activity in the acquisitions space.

Consumer products have enjoyed years of strong growth as new markets opened in developing Asia. China in particular has enjoyed strong growth across a range of consumer good types as the country’s middle class expanded. Private equity firms have been keen to pick up targets in the space as they expand their portfolios to include additional local capacity as well as customers in new markets.

As a result, a study from Bain & Company has found that interest from PE firms in the consumer product space grew sharply in 2018, hitting 6.1% of all invested capital for the year, and making it the third most sought-after category. It is now only behind financial services (23.9%) and advanced manufacturing and services (13.9%).

Corporate venture capital investment

The ‘M&A in Disruption: 2018 in Review’ research found that growth in the segment reflects key changes in the segment as a whole. This is particularly true of insurgent brands, which often leverage local expertise in order to take on international giants in domestic markets.

Short change

The market changes have led to shifts in motivations for consumer goods company investments from PE firms. The number of strategic investments stood at 50% in 2015 compared to deals that increased scope. This has shifted significantly, with 34% of deals focused on strategic outcomes in 2018 compared to 66% for scope. The move towards scope reflects companies seeking out fast-growing products that enable stronger revenue growth streams.

Acceleration in scope-oriented M&A in consumer products

However, there were other motivations for deal activity in the space. Activist investors have put pressure on companies to expand their portfolios in recent years, with the trend expanding from just US targets to Europe.

Further trends

The other key shift in the space regards outbound deal activity. The study found that outbound deal activity has increased significantly in the Americas (up 363%) with total deal volume up only slightly (15%). Key deals included Coca-Cola and Costa, Procter & Gamble and Merck’s consumer health unit, and PepsiCo and SodaStream. In the Asia-Pacific region, outbound deal activity rose 195% while total deal activity fell sharply, by -36%. The EMEA region saw both a sharp decline in outbound deal activity, at -68%, as well as lower overall deal activity, which fell by 32%.

Cross-regional deal making

Deal-making in the current environment is increasingly fraught with uncertainties, as business models change on the back of new technologies, new consumer sentiments and wider market changes from new entrants. As such, acquisitions are increasingly useful as possible hedges on changes in market direction. As such, companies are increasingly pressed to take a future-back position, making sure to incorporate a vision of how the company needs to look in five years into acquisition strategy.

The firm notes that certain acquisitions which enhance a remembrance of a nobler mission, revive a sense of entrepreneurialism and engage directly with consumers may be necessary qualities in acquisitions that transform a company to fit market expectations in the coming decade. While going forward, focus on innovation, partnering with retail winners, reducing cost base and constantly reallocating scare resources will be necessary to protect market share in areas where insurgent local and strategic competitors are active.

Related: Private equity asset growth top priority for 2018.