- Acquisitions have been coffee has been the subject of consolidation for almost a decade
- While 2022 to 2024 was the weakest 3-year period since 1995 for M&A, interest rates and inflation are cooling
- Some expect the the “valuation gap” between M&A sector and specialty coffee will shrink
MERGER and acquisition deal values over the last three years were historically low. After a bumper year in 2021, which saw over $6 trillion spent in global M&A transactions, the three successive 12-month periods were among the weakest in the last thirty.
According to Bain & Co., a consultancy firm, the most obtrusive barriers to dealmaking were macroeconomic uncertainty, valuation gaps and high interest rates. As interest rates look set to shrink in the world’s key economic regions, an M&A recovery is well overdue.
One month into 2025, the industry consensus is that things look up. Major geopolitical and economic uncertainties are waning, deal sizes and quantities are increasing, and the dollar is strong.
Into the late 2010s, coffee industry acquisitions frequently featured in daily news briefings – think Coke and Costa, Nestle and Blue Bottle, or JAB and Peets, Intelligentsia, and Stumptown. Large multinationals were in a rush to scoop up iconic artisanal brands in an effort to capture a slice of the rapidly growing specialty coffee segment.
The market value and consumer appeal of specialty coffee have only grown since pre-COVID. Like the wider F&B space, creative businesses that emphasise quality ingredients, diverse product line-ups, and sustainable business practices are leading the way.
As brands touting specialty ingredients become more attractive to customers, expect them to become more appealing to investors too. To learn more, we interviewed Arno Holschuh, CEO of Ground Control.
Why is specialty coffee ripe for M&A attention?
Personalised nutrition, flavour variety, and sustainability drive the modern food and beverage landscape. Health and wellness trends, plant-based diets, and environmental concerns are all top of mind for the most globalised and connected generation of shoppers.
Indeed, the market reflects just how committed to these principles they are. The global wellness market is estimated to be worth over $1.8 trillion. Included in that figure are the $113 billion plant-based food market and the $114 billion specialty food ingredients market.
Individual food-based experiences undergird modern F&B trends. Unique, functional products tout benefits that offer tailor-made solutions to each consumer’s specific needs or desires; it’s no different for specialty coffee.
The RTD coffee segment, for example, has exploded over the last few years, maturing from basic, UHT-driven caffeine fixes to a truly vast array of specialty-grade, plant-based, nootropic-laden options.
Young people love it: They drink more cold coffee than their elders, are willing to spend more on it, and are the most demanding of convenient beverage formats. Plus, by 2030, Zoomers will have 39% of global spending, but flashy brand campaigns and mammoth brick-and-mortar development programs won’t keep them loyal.
50% are ready and willing to drop a brand if they deem another cheaper or of higher quality, and quality to them means specialty ingredients, functional benefits, lots of options, and eco-friendliness.
As the premium on brand name diminishes, multinationals should diversify their approach. They should snap up specialty businesses not for their reputations but for the quality, variety, and agility of their product portfolios.
What will 2025 bring for specialty coffee-related M&A?
As interest rates and inflation cool and consumer confidence increases in 2025, the valuation gap between the M&A sector and the specialty coffee space will shrink.
“Conditions for M&A activity are good this year,” says Arno. “The environment we find ourselves in will be painful for some players as coffee prices rise faster than the general level for other products.”
“If we see lower interest rates – not a forgone conclusion given the inflationary pressures all around us – then the extra liquidity for acquirers could reinforce the dynamic.”
Moreover, forecasts predict a higher rate of private equity exits this coming year due to better market conditions and increasing pressure from limited partners to recoup their investments. Exits generally mean more M&A activity, and investors seek to maximise value by selling to strategic buyers.
There have already been signs of life in the specialty coffee space. In late 2023, Chobani completed a $900 million takeover of specialty coffee roaster La Colombe, and De’Longhi, a home appliance giant, acquired a minority stake in La Marzocco.
Both instances show larger companies looking to supplement their portfolios with products targeted at the specialty coffee market.
“The real question is which companies will be attractive targets,” says Arno.
“The industry is in a phase of very rapid change with multi-year deficits in coffee supplies related to climate change. It feels structural, which could present a real challenge not just to the short-term liquidity of businesses but also to their long-term value.
“Strong brands that meet customers where they are key. Will there be another Blue Bottle acquisition? No, because that wave of companies has been acquired, La Colombe was the last of that breed. The next M&A cycle will be according to different trends for different reasons.”
As global coffee prices continue to soar, increased cost pressure and tighter margins may mean specialty coffee companies are more likely to sell in order to remain competitive. Mergers or acquisitions by larger groups offer relieving access to integrated supply chains and economies of scale.
In such an environment, companies with a competitive advantage and heightened consumer appeal will be most attractive to investors. The ones with a firm grasp of the key trends in the space will be first in line.
Coffee Intelligence
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