M&A Activity Picks Up in F&B Sectors, Including Functional Water Assets Space

NetworkNewsWire Editorial Coverage

News provided by

May 25, 2021, 08:30 ET

NEW YORK, May 25, 2021 /PRNewswire/ -- After a sluggish start to 2020, merger and acquisition activity in the food and beverage industry survived COVID-19 and picked up in H2, with 136 of the year's 222 transactions closing after June last year. Total transaction value for the year was $13.8 billion, only slightly lower than 2019. Despite the lingering pandemic, consolidation continues in the industry and deal flow has returned to a torrid pace, creating an exceptionally attractive market climate for The Alkaline Water Company Inc. (NASDAQ: WTER)(CSE: WTER) (Profile), the U.S.'s largest independent alkaline water company, and its Alkaline88(R) brand, which is now endorsed by Shaquille O'Neal, NBA Hall of Famer and Papa John's International (NASDAQ: PZZA) board member. Last yea rs' action included growth equity investor PowerPlant Ventures buying ZICO coconut water from Coca-Cola (NYSE: KO) and Nestle SA (OTCPK: NSRGY) acquiring Essentia Water for an estimated $1 billion, a strategic move to strengthen its value-added water business to compete with brands like PepsiCo Inc. (NASDAQ: PEP), which bolstered its water portfolio with the acquisition of SodaStream in 2018. Only slightly stunted by the pandemic in 2020, M&A in the food and beverage industry should accelerate as competition among majors intensifies and suitable targets dwindle.

WTER is now the largest independent alkaline water company in the nation, having reported 2020 FY revenue of $41.1 million, representing 28% YoY.
Alkaline water is an emerging market, expected to reach $1 billion in 2022.
On average, each American drank 43.7 gallons of bottled water in 2019, driving sales to $34.6 billion.
WTER partners with NBA legend Shaquille O'Neal, who will serve as advisory board member and brand ambassador.

Click here to view the custom infographic of The Alkaline Water Company Inc. editorial.

Water, Water Everywhere

Bottled water is hands down the most popular beverage in America by volume, outselling carbonated soft drinks for the fourth straight year in 2019, according to Beverage Marketing Corporation. Sales in 2019 reached $34.6 billion. Data from market research firm Statista shows that 88% of Americas drink water every day and 26% buy name brand water, with every person in America drinking, on average, 43.7 gallons of bottled water in 2019.

The megatrend the water majors are now trying to capture is the increasing consumer health consciousness towards enhanced water as a replacement for sugary drinks. The trend accelerated with people on lockdown buying enhanced water for a slew of reasons, but the fact remains that many consumers have now incorporated value-added waters as part of their lifestyle,

The Alkaline Water Company Inc. (NASDAQ: WTER) (CSE: WTER) is the largest independent player in the alkaline water market that is expected to reach $1 billion by next year. As the name implies, the Scottsdale, Arizona-based company specializes in producing drinking water with trace minerals and electrolytes and a higher pH, specifically 8.8, than regular drinking water, which has a neutral pH of 7. The higher pH is believed by advocates to have a bevy of benefits, potentially slowing the aging process, regulating the body's pH level (neutralizing acidity commonly presented in some diseases) and deactivating pepsin, a principal culprit in acid reflux. Though, The Alkaline Water Company does not make any of these claims.

In addition to its flagship Alkaline88 brand, the company responded to consumer demand by launching a new line of six flavor-infused products branded A88 Infused(TM) in 2019. The products are sold in an estimated 75,000 retail stores, which while impressive, leaves plenty of headroom for growth as it represents only 8% of all retail and hospitality outlets available to consumers. The company is aiming for 90,000–100,000 retail locations in the next year. Any bigger peer looking for immediate market share could leverage WTER's existing distribution — plus its Direct Store Delivery (DSD) platform that now reaches over 10,000 customers — combine it with their network and dominate the alkaline water market segment.

Repeat Customers a Staple

The brand awareness and newfound loyalty during COVID-19 was best exemplified by independent data that showed 31% of the people that drank Alkaline88 during the 52-week period ended March 6, 2021, were first-time buyers. The same research showed that 47% of the people that tried Alkaline88 in the last year have purchased it at least four times.

Part of the reason for the loyalty likely has to do with the social culture of The Alkaline Water Co. Millennials and younger generations are passionate about ethos and factor that into decision making about purchases. The company adheres to the strictest industry guidelines set forth by individual states, FDA, EPA and International Bottled Water Association (IBWA). It has re-tooled its ionization system to use less water and electricity and was the first national company in the industry to offer eco-friendly aluminum packaging options.

Shaq's Golden Rule for Endorsements

Shaquille O'Neal is known not only for his legendary NBA career and four NBA championship rings but also his business skills that have built his brand's empire. He's widely recognized for his prowess as a marketing influencer, a skill attributed to both his massive fan base and his refined business acumen to be selective in what he endorses and to not dilute his value. Today, Shaq stars in commercials for The General, Icy Hot, Papa John's, Ring and Carnival Cruise Lines among other tier-one brands.

As he said in a 2018 interview with HBO Real Sports, O'Neal won't promote a product unless he genuinely likes it or uses it himself. "If I am going to sell to the people, I have to be honest to the people," O'Neal said during the interview.

That says a great deal about WTER as Shaq recently entered a three-year partnership with The Alkaline Water Company. According to the partnership, O'Neal will join the company as an equity partner and member of the board of advisors; he will also serve as a marquee brand ambassador for Alkaline88.

"Alkaline88 is an innovative product in the water category and I am so excited to partner with The Alkaline Water Company to help raise their game to new heights," said O'Neal. "I am humbled by the opportunity to join the Advisory Board while also being a brand ambassador."

WTER officials noted that Shaq's track record as a basketball champion and Hall of Famer has translated into similar successes in business and corporate partnerships. "His reputation as an astute investor, larger-than-life brand partner, and phenomenal ambassador makes this partnership extremely exciting," said Aaron Keay, Chairman of The Alkaline Water Company. "We want to welcome Shaquille to the Company's advisory board and believe his positive presence and global outreach will enable Alkaline88^® to aggressively push our growth trajectory even faster."

Accelerating an Already Steep Growth Curve

With 47% customer retention, the key to Alkaline88 becoming a household brand is a numbers game that can be won quickly with Shaq on the team as well as other partnerships and team members the company is building. For example, just months ago The Alkaline Water Company partnered with Hensley Beverage Company for direct-to-store delivery (DSD) throughout the state of Arizona.

In addition, WTER's last full-year financials included record numbers. Q4 2020 revenue reached $12.1 million, representing year-over-year growth of 51%, while full-year growth for 2020 came in at $41.1 million, which comes in at 28% year-over-year growth. These sales figure are particularly relevant in the food and beverage industry as a quantifiable metric of value. Beverage companies traditionally sell between four to six times gross revenue.

In Q3 fiscal 2021, which ended December 31, 2020, the company reported record revenue of $10.2 million, a 20% increase from the year prior quarter. Even factoring zero growth resulting from WTER's recent partnership announcements, which seems extremely unlikely, the company's FY 2021 forecast would be approximately $41 million, holding steady with last year's performance. Currently, WTER's market cap is an estimated $105 million, or 2.5x gross revenue. In a market that has seen segment leaders such as Core and Essentia acquired at highly favorable multiples, The Alkaline Water Co. stands out as a potentially undervalued takeover candidate.

Majors Fork Out Billions to Make Billions More

The writing has been on the wall for two decades that consumer trends were headed away from sugary drinks and straight toward more flavorful and functional waters that are perceived as far healthier. Beverage companies have had to adapt, and the majors have shown that they're not afraid to open their checkbooks in order to carve back some of the evaporating soda revenue via value-added waters.

Coca-Cola Company (NYSE: KO) may be best known for its eponymous brand, but the product lineup runs deep into other beverages, including popular offerings such Powerade, I LOHAS, Bon Aqua and Dasani that generate more than $1 billion each annually for Coke. In 2007, Coke made its then biggest ever acquisition, paying $4.1 billion for Glaceau Vitamin Water, which was doing $350 million in annual sales (11.7x gross revenue). Coke has since grown the brand to over $1 billion in annual sales.

PepsiCo Inc. (NASDAQ: PEP) has been no stranger to the acquisition pathway to diversify from carbonated beverages. In 2018, Pepsi shelled out $3.2 billion in for SodaStream in 2018, a 31% premium to a stock that was already up substantially for the year. During the latest quarter before the deal was announced, SodaStream brought in a record $171.5 million (equating to a 4.7x gross revenue buyout). Last year, at the peak of the pandemic in March, Pepsi agreed to pay $3.85 billion for the popular energy drink maker Rockstar Energy Beverages, a buyout meant to give Pepsi more exposure to rising demand in the functional beverage space.

Nestle SA ADR (OTC PINK: NSRGY) shook up the beverage market this year while ultimately sending a clear message where its expertise sees the best market opportunity. Terms weren't disclosed, but Nestle announced that it had acquired Essentia. The acquisition news came only weeks after Nestle sold its North American bottled water business, essentially a collection of spring water brands, to private equity firms One Rock Capital Partners and Metropoulos & Co. for $3.2 billion. Nestle believes the sale has it better positioned to capture emerging consumer trends, such as functional water.

Papa John's International Inc. (NASDAQ: PZZA) makes sure its menu caters to those seeking alternatives to carbonated soda. The company is partnered with both Pepsi and Coke, meaning the restaurant, depending on location serves Aquafina, LIFEWTR, Dasani, Gatorade and Montellier Sparkling Water, made by Canadian Pepsi bottler Alex Coulombe ltée, with Pepsi holding the U.S. contract and Coke serving most international locations.

What's of particular interest is that the functional water sector has exceptionally few established companies with stand-out products and growing at a strong clip. Those that are checking all the boxes certainly won't be overlooked when the majors go shopping for their next takeover target.

For more information about The Alkaline Water Company, please visit The Alkaline Water Company.

About NetworkNewsWire

NetworkNewsWire ("NNW") is a financial news and content distribution company, one of 50+ brands within the InvestorBrandNetwork ("IBN"), that provides: (1) access to a network of wire solutions via NetworkWire to reach all target markets, industries and demographics in the most effective manner possible; (2) article and editorial syndication to 5,000+ news outlets; (3) enhanced press release solutions to ensure maximum impact; (4) social media distribution via IBN millions of social media followers; and (5) a full array of corporate communications solutions. As a multifaceted organization with an extensive team of contributing journalists and writers, NNW is uniquely positioned to best serve private and public companies that desire to reach a wide audience comprising investors, consumers, journalists and the general public. By cutting through the overload of information in today's market, NNW brings its clients unparalleled visibility, recognition and brand awareness. NNW is where news, content and information converge.

To receive SMS text alerts from NetworkNewsWire, text "STOCKS" to 77948 (U.S. Mobile Phones Only)

For more information, please visit: https://www.NetworkNewsWire.com

Please see full terms of use and disclaimers on the NetworkNewsWire website applicable to all content provided by NNW, wherever published or re-published: http://NNW.fm/Disclaimer

NetworkNewsWire is part of the InvestorBrandNetwork

DISCLAIMER: NetworkNewsWire (NNW) is the source of the Article and content set forth above. References to any issuer other than the profiled issuer are intended solely to identify industry participants and do not constitute an endorsement of any issuer and do not constitute a comparison to the profiled issuer. FN Media Group (FNM) is a third-party publisher and news dissemination service provider, which disseminates electronic information through multiple online media channels. FNM is NOT affiliated with NNW or any company mentioned herein. The commentary, views and opinions expressed in this release by NNW are solely those of NNW and are not shared by and do not reflect in any manner the views or opinions of FNM. Readers of this Article and content agree that they cannot and will not seek to hold liable NNW and FNM for any investment decisions by their readers or subscribers. NNW and FNM and their respective affiliated companies are a news dissemination and financial marketing solutions provider and are NOT registered broker-dealers/analysts/investment advisers, hold no investment licenses and may NOT sell, offer to sell or offer to buy any security.

The Article and content related to the profiled company represent the personal and subjective views of the Author, and are subject to change at any time without notice. The information provided in the Article and the content has been obtained from sources which the Author believes to be reliable. However, the Author has not independently verified or otherwise investigated all such information. None of the Author, NNW, FNM, or any of their respective affiliates, guarantee the accuracy or completeness of any such information. This Article and content are not, and should not be regarded as investment advice or as a recommendation regarding any particular security or course of action; readers are strongly urged to speak with their own investment advisor and review all of the profiled issuer's filings made with the Securities and Exchange Commission before making any investment decisions and should understand the risks associated with an investment in the profiled issuer's securities, including, but not limited to, the complete loss of your investment.

NNW & FNM HOLDS NO SHARES OF ANY COMPANY NAMED IN THIS RELEASE.

This release contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E the Securities Exchange Act of 1934, as amended and such forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. "Forward-looking statements" describe future expectations, plans, results, or strategies and are generally preceded by words such as "may", "future", "plan" or "planned", "will" or "should", "expected," "anticipates", "draft", "eventually" or "projected". You are cautioned that such statements are subject to a multitude of risks and uncertainties that could cause future circumstances, events, or results to differ materially from those projected in the forward-looking statements, including the risks that actual results may differ materially from those projected in the forward-looking statements as a result of various factors, and other risks identified in a company's annual report on Form 10-K or 10-KSB and other filings made by such company with the Securities and Exchange Commission. You should consider these factors in evaluating the forward-looking statements included herein, and not place undue reliance on such statements. The forward-looking statements in this release are made as of the date hereof and NNW and FNM undertake no obligation to update such statements.

Corporate Communications Contact:

NetworkNewsWire (NNW)
New York, New York
www.NetworkNewsWire.com
212.418.1217 Office
[email protected]

Media Contact:

FN Media Group, LLC
[email protected]
+1-(954)345-0611 

SOURCE NetworkNewsWire