Europe’s biggest bakeries banking on US growth with M&A activity

22-Aug-2024 - Last updated on 22-Aug-2024 at 09:03 GMT

How can European bakery businesses expand into the US? Source: Getty

Some of Europe’s biggest bakeries have their revenue forecasts set high as they plan significant expansions in the USA where innovation is driving sales up.

Large European bakeries like Vandemoortele and La Lorraine are pumping funds into the North American market through mergers and acquisitions, as sector optimism becomes rampant among bakery industry experts there.

Many US bakery bosses expect revenues to be higher in 2024, with 53% projecting a “significant gain” over the previous year, a survey of 40 industry executives by LEK Consulting and Houlihan Lokey has shown.

Ninety-five percent of those asked expected volume sales to rise on last year, and three-quarters predicted profits would top 2023’s by “a significant margin”.

Fig 4 investment priorities — Investment priorities for US bakery businesses

Some 58% of bosses also expected to see more capital investment in the industry than in 2023, with 84% targeting capacity growth and 63% prioritising automation.

What types of bakery innovation is happening in the US?

Driving US baker’s optimism was opportunity to expand; innovation in new formats and flavour formulas; emerging categories; and pricing stability.

Recent US bakery innovation has included a cookie play on the popular red velvet cake by Otis Spunkmeyer. Also, Subway’s new Sidekicks snack collection that includes footlong versions of Cinnabon churros and Auntie Anne’s pretzels sold nearly 30m items within five months of its January launch, claimed the sandwich chain.

The buoyant market, as well as optimism for future growth, has spurred significant M&A activity, particularly from big European players expanding their North American presence.

Fig 2 bakery optimism — Bakery industry optimism

Vandemoortele, a Belgium-based family-owned bakery, acquired a majority stake in Danish pastries maker Banneton in April for an undisclosed sum.

The acquisition would allow the European baker to tighten its foothold and grow in the US market with a local production base.

Which European bakers have invested in the US?

“This transaction represents a historic and important milestone for Vandemoortele of having a first production platform in the US,” said chairman of the board Jean Vandemoortele.

In June, La Lorraine Bakery, also Belgium-based, took a 50% stake in Washington DC-based frozen bakery specialist Bakery de France.

Key takeaways for European bakeries seeking to invest in the US:

LEK Consulting and Houlihan Lokey Bakery Report 2024:

Bakery is highly fragmented and historically has had high M&A consolidation. We expect this to continue based on the data from our survey
Capital investment is picking up. That makes it critical to have a solid capital allocation strategy across maintenance, automation and growth
Automation and efficiency have become key levers for addressing rising wages and commodity costs

For an undisclosed sum, the new joint venture would allow La Lorraine Bakery to bolster its US growth plans through a facility expansion.

“After more than 80 years of growth in more than 35 countries on the European continent, Turkey & Middle East, we have now a great opportunity to scale our expertise and further expand our international footprint to the North American market,” said La Lorraine Bakery Grou CEO Guido Vanherpe.

European bakeries looking to succeed in the US market would be mindful to target growing consumer diet trend including plant-based, allergen-free and low-carb/keto.