Silverwood Partners Releases Natural/Organic Industry Analysis

On the eve of the Natural Products Expo East trade show, investment bank Silverwood Partners has released a detailed analysis and deal review of the natural products industry. While Silverwood offers merger and acquisition advisory services to businesses within a range of industries, the firm’s principal focus is representing companies that produce natural health and wellness products.

In its assessment of the industry, Silverwood cited continued reports of sales and volume growth of natural products “at rates far exceeding those of the conventional consumer market.” Silverwood expects sustained growth of natural and organic products as increasing focus on health and wellness remains a long-term trend among U.S. consumers. And as awareness and demand for natural goods rises, the industry has attracted “strong interest and action from both investors and strategic acquirers.

According to Silverwood’s analysis, natural and organic products totaled $91 billion in sales in 2011, leaping by 10 percent in comparison to 2010 sales. And as sales continue to grow, Silverwood cited a projection that 8.5 percent of all food sales will be natural and organic by 2015, a number buoyed by an increase in new product innovation within the natural segment. Moreover, Silverwood expects that more conventional grocers will feature innovative organic and natural food selections as the products gain traction with greater numbers of mainstream consumers.

Silverwood also identified several breakout product categories and trends that are current at the forefront of the natural products industry. Specifically, the investment bank pointed to tea (set to reach $8.3 billion in sales by 2014), gluten-free products (an estimated $7 billion category), chocolate (a $13 billion industry), super premium juices (totaling $2.25 billion in sales in 2010), and raw, fresh packaged foods.

Silverwood indicated because of growth in natural and organic products “many strategic CPG companies [are] looking to acquire smaller natural and organic companies.” These larger firms are seeking value in companies that offer sustained high margin products and innovation and Silverwood noted several key deals within the natural industry that took place over the last year, including Sunsweet’s purchase of Function and Starbucks’s acquisition of Evolution Fresh.