Big Food’s M&A Craze Comes at a High Price: What Investors Should Know

While larger market share and higher prices often mean money in the bank for investors in Big Food, the same phenomenon also harms consumers, who are already facing escalating food prices at the supermarket. Further, Big Food’s consolidation hurts farmers, a profession which seems to perennially get the short end of the stick. Here’s why investors may want to think twice before doubling-down on the food industry consolidation craze:

Freedom of choice? Not so much (for both the consumer and the producer)

Most investors are also consumers. And when Big Food begins to consolidate, generally consumers are faced with less choices in the supermarket. Indeed, even if all of your favorite brands still appear on shelves, the reality, as this infographic shows, is that choice is more or less an illusion when two or three companies effectively control more than 90 percent of the market, as is the case with soft drinks. Further, the top four cereal companies in America control 80 percent of the market share, while the top for beef packaging operations currently dominate about the same portion of the market; all total, about twenty companies produce most of the food eaten by Americans, including organic brands.

But consolidation affects our ability to choose what we eat in more ways than one. If industry experts are right, a report from adds, “consolidation could mean that fewer, larger plants will process the foods we eat. And as smaller plants shut down, small producers may be left without any nearby facilities to process their crops and animals.”

In this way, our choices are limited by Big Food’s consolidation not just through the increase in market share, but also because, as Big Food becomes bigger, other smaller producers and processors are forced out of the industry, leaving consumers with less and less options from those smaller, ethnic and niche brands Villanova’s Hill commented on at CNBC.

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