M&A activity for vitamins and supplements slowed slightly but remains healthy despite inflation, according to investment banking report

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Inflationary pressures have not dampened consumer spending on vitamins and supplements, according to investment banking firm Capstone Partners (Boston). Capstone Partners released its May 2023 “Vitamins & Supplements M&A Update,” which notes a “modest slowdown” in M&A activity but overall says investment in the sector remains “healthy.”

“Economic uncertainties have engendered some caution in the M&A market, leading to a modest slowdown in vitamin and supplements M&A year-to-date (YTD)—though activity remains healthy,” the report states. “Buyers have exercised patience, awaiting greater visibility on interest rate trajectories and the efficiency of the Federal Reserve’s monetary-tightening campaign. Concurrently, prospective sellers have sought increased market transparency to secure optimal value and favorable transaction structures. While M&A headwinds are expected to persist in the short term, the potential pause in interest rate hikes over the next few months could provide the impetus for a resurgence in transaction activity.”

The vitamins and supplements market is faring better than others under inflationary pressure, Capstone points out. “Capstone Partners’ latest Vitamins & Supplements M&A Report showcases the sector’s resilience amidst inflationary pressures,” it states. “While discretionary spending has pulled back in many categories, consumers continue to embrace the vitamins and supplements sector as a staple in their purchasing behavior.”

Consumers are looking for bang for their buck, though, with the report noting that more shoppers are seeking substantiation, such as clinical studies, for what companies claim their products can do. They are also demanding transparency in ingredient sourcing. “This has created a buyer universe that seeks science-backed providers of vitamins and supplements, particularly those catering to areas like immune function, cognitive and mental well-being, and digestive health, which have garnered significant consumer interest,” the report notes. Private-equity investors are also still “actively” pursuing deals in the contract manufacturing space, the report adds.

In short, “Moving through 2023, demand in the vitamins and supplements sector is expected to remain strong, despite recessionary fears and persistent cost pressures. Brands with clinical backing and proven efficacy are poised to capture and retain consumer purchases as the flight for quality extends from the investment community to the consumer.”

Read the full report here.