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Based in Melbourne (Victoria) we deliver business valuations all over Australia using expert business valuers and resources that allow us to work remotely.

We have completed:

Contact Us

L3/162 Collins St, Melbourne, 3000

0421 069 717

m.williams@exitvalue.com.au 

Food Processing Business Valuation Issues

Food is one of the great constants of life - we can't live without eating.  So the food processing and food manufacturing industry has seen consistent growth - but not across all sectors. 

 

Over the past two decades tastes and markets (both domestics and overseas) have changed and this has influenced revenue growth, with the size of some sectors such as bread and cereal manufacture declining and meat processing increasing by more than 6%

The food manufacturing industry is exposed to similar issues as the general manufacturing sector, such as:

  • New technology 

  • Low cost of manufacture (mainly from labour costs) from overseas competitors

  • Lowering of import tariffs exposing industry to global competition

  • Increased production costs in Australia such as raw materials, labour and freight costs.

In general the industry has opportunities with:​

  • Design of own products

  • New manufacturing technology and automation

  • Export to emerging and established economies including South East Asian countries, China, India and other regions.

 

Most food processing business valuations will attract similar EBITDA multiples (or in some cases higher EBITDA multiples) to that of manufacturers as long as there is reasonable size and scale, product differentiation, effective use of technology and access to new markets.

Key Drivers of Food Processing Business Valuations

Key Industry Statistics

There is no single industry category that covers food manufacturing and processing but is spread out over many sectors.  According to IBISWorld, there is a wide variety of industry revenue growth rates, including:

We have collated industry performance statistics based on ABS data and detailed them in a whitepaper, which can be downloaded from the link below.

What Makes a Business Highly Valuable?

SME Performance Whitepaper

A food processing business valuation is driven by key factors below such as: 

  • Number of own products and product differentiation

  • Size and diversity of market coverage

  • Scale of operations and economies of scale

  • Low labour costs per unit of production

  • Technology used in manufacturing

  • Level of product development

  • Certification to relevant quality, OH&S and environmental standards.

EBITDA Margins can be low and range from less than 5% to 25% (for some large manufacturers), depending on the size of the business, industry competition, technology and automation and productivity.

EBITDA Multiples for most food processing businesses will remain low, and will be heavily influenced by size and scale.  Typical EBITDA Multiple ranges we have observed are:

  • Revenue of $1m - $10m: 1.5x - 3.0x

  • Revenue of $10m - $20m: 2.5x - 4.5x

  • Revenue greater than $20m: 4.0x - 6.0x

Our Business Valuation Experience

Our food processing business valuation experience has included including business valuations for:

  • Sauce and condiments manufacturer and wholesaler with own products and national coverage 

  • Food ingredients wholesaler

  • Biscuit manufacturer with own product and national coverage

  • A number of wineries within Victoria

  • Fish and fish products processor and wholesaler

  • Food packaging contract manufacture

  • Cereal and muesli manufacturer

  • Agri-products storage and wholesaling

  • Confectionery manufacturer

  • Pie and bakery products manufacture

  • Almond growing and processing

  • Cheese manufacture

Food processing business valuation