Portfolio Rationalization, Branded Food M&A Drive Sector Normalization Narrative
Demand for better-for-you (BFY) foods, ethnic flavors, and sustainability have created a durable runway for increased innovation and merger and acquisition (M&A) activity in the Food sector. Deal volume has accelerated materially in year-to-date (YTD) 2026, supported by consistent but targeted public buyer appetite and rising private equity (PE) interest in premium assets with differentiated wellness, clean-label, international, or sustainability positioning. Capstone Partners – IMAP USA anticipates this productive M&A activity will continue through year-end as enduring changes in consumer purchasing patterns and easing macroeconomic conditions bolster the dealmaking backdrop.
Key Consumption Shifts Bring Innovation and Growth Runway
Consumer preferences have increasingly coalesced around BFY foods, ethnic flavors, and sustainability, creating opportunities for innovation and M&A in the Food sector. The traditional differentiation of food and healthcare has blurred as consumers view dietary choices as a form of proactive heath management. The adoption of weight loss medications such as glucagon-like peptide-1s (GLP-1s) and rising nutrient literacy have accelerated “food as medicine” trends, with a growing emphasis on high-protein diets. Protein consumption has captured steady demand among more performance-oriented and athlete demographics. Subsequently, protein intake demand has become an increasingly mainstream trend.
Consumers have leveraged protein-dense food items to reduce the caloric proportion derived from carbohydrates in their diets and assist weight loss and strengthen body composition. This shift has influenced new product innovation strategies across categories, particularly among Snack segment participants. In February 2026, PepsiCo (Nasdaq:PEP) announced the launch of Doritos Protein, offering 10 grams of protein per serving, with an additional format containing 17 grams of protein planned for late 2026, according to a press release.
Similarly, Utz Brands (NYSE:UTZ) has identified protein fortification as a key 2026 innovation priority. “One of the more exciting innovations we plan for Utz Brand in 2026 is our Protein line. Consumers have been asking for protein offerings for some time, we felt it was critical to introduce products that met this need without sacrificing taste. These products will offer 8 to 10 grams of protein and will be available in a variety of pack sizes starting in the second quarter of 2026,” said Howard Friedman, CEO of Utz, at the February 2026 Consumer Analyst Group of New York Conference. High-growth, nimble, and insurgent brands with protein-forward formulations, thoughtfully designed macronutrient profiles, and strong flavor credentials remain well-positioned to capture share from incumbents. These companies notably possess early mover advantages and represent attractive acquisition targets. Meanwhile, legacy players will likely keep refining product lines and acquiring operators in the space with strong brand-equity and protein-forward products.
Beyond protein, clean-label attitudes, sustainability, and authentic cultural flavors are further shaping purchasing behavior in the sector. As awareness of the health implications of ultra-processed foods has increased, clean-label products have gained momentum. The majority (66%) of surveyed consumers reported trying to eat less processed foods, according to the 2025 Whole Grain Consumer Insights Survey. Bridging these protein and clean-label trends, Jack Link’s introduced a three-ingredient line of beef sticks, steaks, and slices under its Clean Ingredient portfolio in March 2026, according to a press release. Sustainability has also emerged as a key point of differentiation, with 80% of global consumers indicating a willingness to pay a premium for sustainably produced goods, according to a 2026 Maple Leaf Foods (TSX:MFI) investor presentation.
Meanwhile, demand for ethnic and globally inspired foods has continued to accelerate. In the U.S., population growth led by Hispanic and Asian demographics has translated into stronger demand for authentic international cuisines and regional formats. Collectively, these green shoots have underpinned M&A rationale and are anticipated to stimulate robust sector growth, elevate innovation priorities, and drive consolidation activity in 2026 and 2027.
Food Sector M&A Activity Jumps, Points to Normalization
The Food sector has experienced a large rise in dealmaking, with 40 transactions announced or completed YTD - a 66.7% increase compared to the prior year period. While the year-over-year (YOY) growth appears robust, YTD transaction activity more aptly reflects a normalization of deal flow following the subdued M&A environment seen across the broader Consumer industry throughout 2025 which saw deal volume decline 18.9% YOY. If Food sector transaction activity continues at its current pace, full-year 2026 activity would reach 236 deals, in-line with the 2019-2025 annual average of 239 transactions.
The average EV/EBITDA multiple has ticked up to 12.7x YTD, signaling stabilizing valuations following elevated M&A pricing in 2023 (15.4x) and 2024 (14.9x). Bid-ask spreads have remained a hurdle, but this figure suggests these tensions may be subsiding. Strategic buyers have led deal activity to date, comprising 65% of total transactions. Private strategic acquisitions have nearly doubled (+90% YOY) to 19 transactions while public companies have added three deals YOY for a total of seven transactions in YTD 2026. Public acquirer focus has narrowed on opportunities that clearly fill gaps in categories or servicing capabilities.
Despite this more targeted approach, M&A appetite has remained intact as a strong pipeline of deals has continued to build in the market. Capstone expects more engagement from public players in the M&A market as firms turn to inorganic growth to help buoy share price performance and market share expansion.
PE firms have continued to deploy capital into the sector, with sponsor activity having grown from 11 deals in YTD 2025 to 14 in YTD 2026. Fund managers have established six platforms to date and contributed eight add-ons to existing portfolio companies. Premium assets possessing clear differentiation through wellness, international, and sustainability positioning have consistently attracted middle market sponsors. Assets with defensible unit economics and clear exit paths in these pockets of the market will likely see strong PE engagement moving through 2026.
Branded M&A Surges, Activity Focuses on Key Hot Pockets
Branded segment M&A activity has more than tripled (+210% YOY) YTD to 31 deals following a retreat in 2025. However, the prior year’s tally did remain above the 2019-2025 annual average of 89 transactions, leaving YTD 2026 on pace to rival 2024’s standout dealmaking in the segment. Many business owners have shifted away from broad, scale-driven consolidation toward highly targeted acquisitions that complement core competencies and secure a long-term growth runway. Notably, 21 of the 31 branded acquisition targets to date bear positioning in BFY, High Protein, International, and Sustainability categories. This dynamic has pushed larger conglomerates to shed trend-trailing brands no longer key to strategic repositioning efforts. These divested assets have represented prime platform and bolt-on opportunities for PE firms and middle market strategics looking to enhance regional consolidation, bolster market share, and penetrate new channels. Additionally, as these companies turn over portions of their portfolios, they have re-entered the market as buyers to align positioning in high-growth, margin-defensible verticals via acquisitions of differentiated middle market brands. Particularly, many incumbents have increasingly utilized a buy-versus-build playbook to limit innovation risk and acquire proven market winners ready to professionalize and scale.
Corporate divestiture activity peaked in 2024 at 29 transactions. While this activity dipped in 2025, YTD 2026 has observed eight divestitures, likely attributable to overhang from deals delayed in 2025 amid elevated tariff volatility. Sponsors have continued to sit on record levels of dry powder and exit-ready portfolio companies, signaling pent-up demand for both asset monetization and capital deployment. Portfolio companies within the Branded segment have matured beyond typical four-to-five-year holding periods, evidenced by the 56 platform formations between 2019 and 2022 significantly outpacing the 24 M&A exits that have materialized between 2023 and YTD.
This is particularly notable as the Initial Public Offering market has been less viable in recent years, leaving the majority (57.1%) of mature platforms unmonetized. Capstone expects the dual pressure for fund managers to distribute returns to limited partners and deploy healthy levels of dry powder to accelerate branded M&A activity through 2026. The Branded segment will likely capture much of this activity as investors gravitate towards durable health and wellness tailwinds driving the market.
The above is an excerpt from Capstone Partner – IMAP USA’s April 2026 Food Sector Update. For more than 20 years, Capstone Partners has been a trusted advisor to leading middle market companies, offering a fully integrated range of investment banking and financial advisory services uniquely tailored to help owners, investors, and creditors through each stage of the company's lifecycle. For more information, visit www.capstonepartners.com.
