NEW YORK (Reuters) - Healthy products are driving growth in the food and beverage business and providing fertile ground for investment, a senior private equity executive said at the Reuters Consumer and Retail Summit this week.
"Health and wellness was a trend that existed five years ago, but the magnitude of that trend has changed," said Scott Dahnke, managing partner of Catterton Partners. "As a result, you're seeing an increased level of interest and investment on the part of global multinational companies in that area."
Catterton, a consumer-focused private equity firm with over $2 billion under management, owns Breyers Yogurt Co., and together with Bain Capital Partners, it acquired Outback Steakhouse parent OSI Restaurant Partners Inc. last week.
Dahnke said the new owners of Outback, the Australian-themed restaurant chain, have already added more salads to the menu, an effort to lure more female customers.
Dahnke also said that Breyers is going to launch new yogurt products, but declined to give specifics. In response to a question, Dahnke said the product would not be a drink, but "more along the lines" of Danone's (DANO.PA: Quote, Profile, Research, Stock Buzz) Activia, a yogurt the company claims can help regulate the digestive system.
Dahnke said part of his job, as a private equity investor, is to identify attractive small companies, and help them grow into medium-sized companies that strategic buyers can then take over and help mature.
Coca-Cola Co.'s (KO.N: Quote, Profile, Research, Stock Buzz) recent $4.1 billion acquisition of Glaceau was a good example, he said.
"The size of Glaceau today makes it a much better fit for Coke than the size of Glaceau four or five years ago. It's almost like a toddler now, it has its own legs. They can grow it into an adult," Dahnke said.
Coca-Cola also recently purchased Fuze, another drink company with a healthy image, while rival PepsiCo Inc. (PEP.N: Quote, Profile, Research, Stock Buzz) recently purchased Naked Juice and IZZE Beverage Co.
WHAT'S INSIDE?
Consumers are increasingly concerned about product ingredients, especially in the wake of the discoveries of potentially toxic counterfeit toothpaste and poisonous pet food, Dahnke said. He pointed to increasing sales of its Wellness Pet Food, which he said is made from all-natural ingredients.
Earlier this year, the chemical melamine was found in wheat gluten and rice protein imported from China for use in some pet foods, and was believed to have killed or sickened dogs and cats, and triggering a recall of more than 100 brands.
"Not surprisingly after the scare, consumers have been more focused on what they are feeding their pets, and we have had tremendous growth as a result," Dahnke said, adding that the business was already increasing about 20 percent, but is now growing at two to three times that rate.
Dahnke said Wellness was "generally not sourcing products from China as it relates to our pet food," but said it did get brown rice protein from China, since it is difficult to find domestically.
The U.S. Food and Drug Administration said that melamine was found in some wheat gluten and rice protein from China, but did not specify whether that protein came from white or brown rice.
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