Dec 14, 2021

Health & Wellness Trends: Vitamins & Supplements to Sustain Elevated Consumer Demand

Health & Wellness M&A is booming, with strong interest from acquirers in Better-for-You brands, Vitamins & Supplements, and Women’s Health – an exceptionally hot segment of the market right now.

Lisa TolliverManaging Director, Capstone Partners

Lingering pandemic effects, rising awareness of nutritional and immunity boosting products, and the prevalence of e-commerce have created a sustained level of elevated demand in the consumer-based Health & Wellness sector. While the U.S. Supplements market is unlikely to match the record 14.5% sales growth experienced in 2020, forecasts anticipate a permanent increase in near-term growth. Notably, 2023 supplement sales are expected to outpace pre-COVID estimates by $1.4 billion, according to Nutrition Business Journal.1 In addition, healthy public company performance has supported industry optimism with leading players recording strong operating results. Global ingredient and performance nutrition manufacturer Glanbia (ISE:GL9) recorded a 15.7% year-over-year (YOY) increase in revenue through Q3, driven by favorable demand across its Glanbia Performance Nutrition and Glanbia Nutritionals segments, according to its earnings release.2 As consumer demand for functional food, performance nutrition, and overall wellness solutions remains robust, industry participants are expected to continue to allocate capital towards expanding and enhancing high growth product categories – creating a favorable backdrop for healthy consolidation activity. While inflation concerns and supply chain challenges remain key headwinds, industry players are expected to increasingly eye opportunities to bolster margins and vertical integration.

M&A Activity at Record Levels Heading Into 2022

Merger and acquisition (M&A) activity across the Consumer industry has approached record levels in 2021, with the Health & Wellness sector emerging as a top performer. Through year-to-date (YTD) Health & Wellness M&A volume has increased 36% YOY as business owners have been eager to capitalize on the high valuation environment amid heightened demand for quality brands and contract manufacturers. Strategic buyers have comprised a majority of transactions, accounting for 67% of deals YTD – seeking synergistic targets with complementary products or access to high growth end markets. Notably, traditional drug players have recognized the revenue opportunities in rapidly growing consumer Health & Wellness end markets, evidenced by Catalent’s (NYSE:CTLT) acquisition of Bettera, a premier contract manufacturer of gummy nutraceuticals and nutritional supplements, for an enterprise value of $1.0 billion and equivalent to approximately 6.7x revenue. Bettera significantly strengthens Catalent’s position as a leading partner for Consumer health brands, expands its nutritional supplements capabilities, and marks its entrance into the Nutraceutical Gummies, Soft Chews, and Lozenges markets. The transaction also represents Highland Partners exit from Bettera, after forming the company through four acquisitions beginning in 2017, demonstrating the value that can be realized through a successful buy-and-build strategy.

Private equity buyers have continued to demonstrate robust appetite for privately-owned health & wellness product providers, accounting for 33% of total YTD transactions. Sponsors are often assessing the most profitable means of gaining sector exposure, either through a brand or contract manufacturer. Companies with strong brand recognition, direct-to-consumer capabilities, subscription-based revenues, intellectual property, or product differentiation have garnered heightened interest from the private equity community in the current market. In addition, channel exposure has impacted buyer activity, as those selling to a specialty channel often possess a strong repeat customer base allowing for greater transparency in revenue projections. Moving into 2022, private equity firms are expected to remain active in the sector, with a record of $1.4 trillion of available dry powder (PitchBook3) to deploy into investment opportunities.

Performance Supplements and Nutrition Providers Experience Wave of Demand

Health & Wellness providers offering performance supplements and nutritional products have captured elevated demand as athletes and recreational enthusiasts have placed a greater emphasis on meeting nutritional requirements to bolster physical performance and recovery. The backdrop of heightened consumer interest has contributed to optimistic sector expansion, with the global Sports Nutrition market expected to grow at a compound annual rate of 10.9% from 2021 to 2028, according to Grand View Research.4 Notably, leading public players have pivoted their strategy to cater to performance nutrition end markets, evidenced by Glanbia's announced sale of its 40% stake in Glanbia Ireland for approximately $347 million, representing a high single digits EBITDA multiple, according to its Q3 sales and revenue call.5 The sale allows it to increasingly focus on its leading growth segments, Glanbia Performance Nutrition and Glanbia Nutritionals which offers leading sports nutrition brands Optimum Nutrition and BSN. Appetite for sports and nutritional offerings has extended to the private market, with several notable transactions reflective of robust buyer interest.

  • 4x4 Capital acquires the former Sports and Active Nutrition division of The Bountiful Company (October 2021, Undisclosed) - 4x4 Capital, an investment platform focused on Consumer, Services, and Industrials sectors, has acquired the former Sports and Active Nutrition division of The Bountiful Company from KKR (NYSE:KKR) and Carlyle (Nasdaq:CG) for an undisclosed sum. The transaction follows the Bountiful Company's sale of its portfolio of vitamin and supplement brands to Nestlé in April for an enterprise value of $5.75 billion and equivalent to approximately 16.8x EBITDA. The sports and active nutrition portfolio consists of leading brands including Pure Protein, Body Fortress, MET-Rx, and Balance.
  • Alete Active Nutrition acquires Bonk Breaker (September 2021, Undisclosed) - American Pacific Group-backed Alete Active Nutrition has acquired Bonk Breaker Nutrition, a provider of real food energy bars, electrolyte energy chews, and protein bars, for an undisclosed sum. The transaction marks American Pacific Group's third add-on acquisition in the Sports Nutrition space since establishing Alete Nutrition in 2020. The acquisition demonstrates the value private equity players are placing on establishing robust sports nutrition portfolios and fueling brand growth and scale through complementary acquisitions.
  • Laird Superfood acquires Picky Bars (May 2021, $13.1 Million, 1.2x Revenue) - Laird Superfood (NYSEAM:LSF) has acquired nutritional products provider P icky Bars for an enterprise value of $13.1 million, equivalent to 1.2x revenue. Picky Bar's products are sold through a direct-to-consumer platform and offers a subscription box and loyalty program, which are highly sought-after characteristics among buyers. Laird Superfood, which secured a $10 million later stage financing round from Danone Manifesto Ventures in April 2020, prior to its initial public offering in September 2020, will expand its position in the Healthy Snacking segment through the acquisition.

Women's Health Products Garnering Increased Investor Appetite

The Women's Health & Beauty Supplement market has received increased investment and acquisition appetite in recent years, with health & wellness players taking a closer look at establishing expansive offerings in the space. The sector is expected to exhibit steady near-term growth, reaching a market size of $76.6 billion by 2028, according to Research and Markets.6 Pharmaceutical companies have been particularly active in targeting women's health applications, seeking strong consumer brands with a proven record of sales. High multiples have been awarded to leading private women's health brands where synergies and expansion plays are present. This has been evidenced by Alliance Pharma's (AIM:APH) December 2020 acquisition of Biogix, the owner of Amberen, a branded over-the-counter menopause symptoms relief product, for an enterprise value of $110 million and equivalent to approximately 5x sales and 15.7x EBITDA. Through YTD, buyers have been particularly interested in brands with research-backed proprietary formulas, strong e-commerce capabilities, recurring revenue, and exposure to large addressable markets. Select recent women's health transactions are highlighted below.

  • Everly Health acquires Natalist (October 2021, Undisclosed) - Everly Health has acquired women's health products provider Natalist for an undisclosed sum, marking its third acquisition in six months. Natalist offers conception and pregnancy products including prenatal supplements, and pregnancy and ovulation tests. The transaction bolsters Everly Health's product portfolio and customer reach.
  • Pharmavite acquires Uqora (July 2021, Undisclosed) - Pharmavite has acquired leading urinary health brand Uqora for an undisclosed sum, continuing its strategy to bring science-based solutions to the Women's Health market. "Uqora plays a central role in our long-term strategy to offer the most comprehensive women’s health platform in the Vitamin, Mineral and Supplement industry and alongside our existing EQUELLE® brand, furthers our commitment to innovating in the underserved Women’s Health market," commented Jeff Boutelle, CEO of Pharmavite in a press release.7


Endnotes

  1. Nutritional Outlook, "Dietary supplement sales success post-COVID: How can industry keep the momentum going after the pandemic?" https://www.nutritionaloutlook.com/view/dietary-supplement-sales-success-post-covid-how-can-industry-keep-the-momentum-going-after-the-pandemic, accessed December 1, 2021.
  2. Glanbia, "THIRD QUARTER 2021 INTERIM MANAGEMENT STATEMENT," https://www.glanbia.com/sites/glanbia/files/glanbia/investors/results-presentations/2021/Q3-2021-Interim-Management-Statement.pdf, accessed December 1, 2021.
  3. PitchBook, "Q3 2021 Private Fund Strategies Report," https://pitchbook.com/, accessed November 21, 2021.
  4. Grand View Research, "Sports Nutrition Market Size, Share & Trends Analysis Report By Product Type (Sports Drink, Sports Supplements, Sports Food), By Distribution Channel (E-commerce, Brick and Mortar), By Region, And Segment Forecasts, 2021 - 2028," https://www.grandviewresearch.com/industry-analysis/sports-nutrition-market, accessed December 1, 2021.
  5. AlphaSense, "Glanbia Plc - Q3 2021 Sales and Revenue Call - Interim Management Statement," https://www.alpha-sense.com/, accessed December 1, 2021.
  6. Research and Markets, "Women's Health and Beauty Supplements Market Size, Share & Trends Analysis Report By Product, By Application, By Age Group, By Consumer Group, By Sales Channel, By Region, And Segment Forecasts, 2021-2028," https://www.researchandmarkets.com/reports/5463602/womens-health-and-beauty-supplements-market, accessed December 1, 2021.
  7. Pharmavite, "Pharmavite Acquires Leading Urinary Health Brand Uqora in Push to Expand Women’s Health Offering," https://www.pharmavite.com/perspectives/news/pharmavite-acquires-leading-urinary-health-brand-uqora-in-push-to-expand-womens-health-offering/, accessed December 2, 2021.

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