State of VC in CPG: ‘Marquee acquisitions’ kick off Q1 2025

Several major acquisitions in the last six months are providing venture capitalists the liquidity they need to invest in food and beverage brands, following a flat year of private equity deals in the food and beverage space in 2024, as two investors shared at the Natural Products Expo West conference.

Flower Foods acquiring Simple Mills and PepsiCo closing its acquisitions of Siete Foods in 2025 are “marquee acquisitions” that are returning capital back to venture capitalists, noted Arthur Chow, principal at S2G Investments. These sales will return capital to VC investors, allowing them to reinvest in funds and ultimately back into brands, he added.

M&A activity is expected to pick up this year, as “large companies are even moving downstream” with “acquisitions below $75 million in revenue,” explained Andrew Dickow, managing director at Greenwich Capital Group.

Simple Mills and Siete Foods were large acquisitions with estimated 2024 sales of $240 million and $500 million, respectively, for the brands.

“2024 was an okay year, but I think you are seeing a big pickup in activity, and our pipeline is as strong as it has ever been, albeit there is going to be a little bit of uncertainty. Some of the jubilation coming out of the election has dampened a little bit,” Dickow elaborated.

“I am pretty bullish on what we are going to see in M&A this year, and we have seen a lot of activity, although not a lot of middle market companies have really gone to market as much as you think, and I think Q3 and Q4 you are going to see a lot more,” he added.

Attracting VC investors with a focus on margins

These acquisitions put money into VC investors’ pockets, fueling new funds and further CPG investments. In recent years, venture capitalists shifted their focus from growth at all costs to prioritize profitability, Chow explained.

Startup brands raising VC funding in 2025 should focus on gross margins and how their supply chains impact financial metrics, Chow elaborated.

Brands must bolster their supply chain resiliency – especially in uncertain economic times – by adding in manufacturing redundancy, whether a brand is self-manufacturing or working with a co-manufacturer, Chow noted. Understanding how supply chains will impact the gross margins is crucial, he added.

Additionally, early-stage brands must prove that they can gain some market traction – even in a small local market – before they have a chance of receiving VC interest, Dickow emphasized.

“The biggest issue I see with early-stage, seed or pre-seed companies is they have no proof of concept. They talk about how great their brand is, and people are going to love it. But they have not even demonstrated any success on a small scale – get into 50 or 100 doors or get to even a few $100,000 of revenue. Go prove your concept, get some market intelligence, and then be able to share those insights with investors,” Dickow elaborated.

When should a company exit the market?

With recent acquisition activity, more startups might be eyeing an exit, but they should prioritize building their retail presence strategically with an eye to healthy margins, Chow noted.

“If you are thinking about building your business just purely based on exit, that is not going to work out well,” Chow said. “It is often about focusing on how you think about doors and velocity and not growing too fast in distribution because there is certainly that aspect of getting in doors that are not productive.”

Founders and startups should prioritize developing strong brands and businesses and not worry about a big exit, Dickow said, echoing Chow’s points.

“When I am talking to early-stage companies, and they start telling me about the multiples and what they are going to exit at when they first started the company, that is always a huge red flag for me. You should build your company so that it is resilient, and then selling should be a natural outcome of that,” Dickow elaborated.