Consumer Markets – Food Services

Q4 2023: Mergers and Acquisitions Trend Report

Industry Overview

• Since the conclusion of the COVID-19 pandemic, the U.S. Accommodation and Food Services industry has a positive outlook, backed by high consumer demand, convenience and a rise in average disposable income.
• Activity within the industry is strongly correlated to shifts in the general economy. Consumer preferences are often very cyclical and highly dependent on pricing. As such, the Russia-Ukraine threatens the supply chain for food and oil, affecting macroeconomic demand for food service.
• Key players are Yum Brands, Marriott International, Hilton Worldwide Holding, Starbucks, and Darden Restaurants.
• Employment across the sector is expected to keep growing, offsetting industry layoffs from COVID-19.

Key Industry Trends

• Consumer preferences have shifted toward healthy dining choices and cooking at home, a trend intensified by the pandemic. The sector has experienced growing levels of competition from home delivery food subscriptions, which encourage more people to cook meals at home, limiting restaurant spending.
• B2B profit is important for this sector, as businesses represent the second-largest market for food services. As companies become increasingly profitable, they are more likely to spend on client dinners, meetings, lunches, or business travel and accommodations.
• Individual consumers and households account for more than 80.0% of the food service market, making activity in the space very dependent on aggregate consumer income.

Recent M&A Transactions

Historical Performance

• The strict regulations associated with the COVID-19pandemic damaged revenue and profit significantly. Thequarantine period led to built up consumer demand whichwas initially realized in 2021. As the economy continues torecover, revenue growth is likely to follow suit.
• The Food Service Industry revenue has increased at CAGRof 2.l% to $1.3 trillion, over the five years to 2023.

Future Industry Growth

• As consumers have more available income, they will likelyspend on sector products and services, choosing to eat outat food service establishments or book travel plan.
• Recognizing the economic power of wealthierconsumers, accommodation and dining providers aredeveloping cooperative relationships with paymentvendors like credit card companies.