Sixth Sense...by Menachem Lubinsky
The news that PepsiCo is eyeing a possible interest in a kosher company (Strauss) is not surprising, given the value that a kosher company offers investors nowadays. The acquisition of the Manischewitz brand last month was yet another example of kosher's strong attraction to investors. Unlike diet foods or even organic and natural foods, kosher is a category that is stable and not subject to fads or trends. For the past twenty years, its growth has been steadily surpassing other categories and it has spread out to all regions of the country. Concerns over food safety have brought many non-traditional consumers to the kosher aisle. It may come as no surprise that the mergers & acquisitions bug has taken hold in many smaller companies with kosher certified products. My firm ( LUBICOM Marketing Consulting), for example, was involved in arranging several M&A's as well as capitalization for several smaller kosher food companies. It makes lots of sense for smaller companies to pool their resources and take advantage of common distribution channels. The trend is likely to continue as kosher continues to be one of the major growth categories in food.
KosherToday has covered the new involvement by Israeli entrepreneurs in acquiring food companies, including several in the US. I can see this trend continuing, as kosher represents a strong vehicle for entry into the lucrative US food market. Larger investors will be looking for companies that offer a more substantial return while smaller investors will be looking to take advantage of strong kosher brands.
In the M&A's in which I was involved, the companies stood to gain substantially from consolidation of management, marketing and management resources. It is more or less the objective of all suitors of kosher companies to consolidate resources to turn a profit. While kosher is obviously a favorite of investors, it still requires sound business practices to make it profitable. For investors, the upside of kosher is fairly obvious. What remains for them is to turn kosher into a sound business that can take advantage of an $11 billion market.
