De-Risking Food & Beverage M&A: Why Technical Diligence Matters
Food and beverage M&A continues to heat up, with acquisitions offering a fast path to growth. But while financial performance and brand equity are analyzed in depth, technical feasibility often receives far less attention. That oversight can introduce significant risk.
Products that look promising on the surface may not scale profitably, may depend on fragile supply chains, or may lack a pipeline to sustain growth. Incorporating technical diligence into the evaluation process helps deal teams avoid surprises and make smarter bets.
At Eurofins Product Development & Innovation, we help private equity firms assess the real-world viability of food and beverage targets. Three areas consistently shape long-term success:
Scalability
Can the product move from pilot to commercial production without major reformulation?
Assess whether the formulation is production-ready or if ingredient substitutions, process adjustments, or equipment upgrades will be required. A scalable product should maintain sensory quality and performance across batch sizes without compromising cost or compliance.
Are processes and packaging designed for efficiency at scale?
Evaluate whether manufacturing workflows, automation potential, and packaging formats are optimized for high-volume throughput. Consider line speed, labor intensity, and compatibility with existing infrastructure to minimize capital expenditure and operational complexity.
What are the margin implications once scaled?
Model unit economics at commercial volumes, factoring in ingredient costs, labor, packaging, logistics, and overhead. Determine whether economies of scale will improve gross margins or if scaling introduces new cost pressures that erode profitability.
Supply Chain Stability
Are critical ingredients available at scale, at stable cost?
Conduct a sourcing audit to ensure key inputs—especially novel or functional ingredients—can be procured in sufficient quantities without volatility. Consider seasonality, geopolitical risks, and supplier capacity when forecasting demand.
Is there redundancy in suppliers, or is the company exposed to single-source risk?
Map supplier dependencies and identify areas of vulnerability. Diversify sourcing across geographies and vendors to mitigate disruptions and strengthen negotiating leverage.
Could regulatory changes or global events disrupt sourcing?
Monitor evolving food safety regulations, import/export restrictions, and environmental policies that could impact ingredient availability or compliance. Build contingency plans for climate-related disruptions, trade disputes, or health crises.
Supply Chain Stability
Beyond the hero SKU, is there a credible roadmap for new products or formats?
Review the product development calendar and concept pipeline to ensure sustained growth. A strong roadmap should include adjacent categories, seasonal launches, and format innovations that expand market reach.
Are those future products aligned with consumer and regulatory trends?
Validate that upcoming innovations reflect macro trends like clean-label, plant-based, functional nutrition, and sustainability. Ensure formulations anticipate regulatory shifts in labeling, claims, and ingredient approvals.
Does the company have the structure or partners to sustain innovation?
Examine whether internal teams, external R&D partners, or co-manufacturers are equipped to support ongoing development. Look for agile processes, cross-functional collaboration, and access to trend intelligence that fuel long-term creativity.
The takeaway: In food and beverage M&A, financial diligence tells you where the company has been. Technical diligence tells you where it can realistically go. By integrating food science expertise early, PE firms can reduce risk, sharpen valuations, and position acquisitions for long-term growth.
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