The European food ingredients market comprises businesses that produce, distribute and trade different kinds of food ingredients. As such, we have segmented the market into: (i) milled products & baking ingredients, (ii) protein & dairy ingredients, (iii) food additives, (iv) spices & sauces and (v) mixed.

The broader food ingredients market remains fragmented. While there are leading generalists, such as International Flavors & Fragrances (US), Cargill (US) and DSM-Ferminich, the market is also characterised by a long tail of smaller, local champions. The European market is expected to consolidate going forward, with acquisitive drivers mostly relate to product portfolio expansion, acquiring innovative technologies and strengthening market positions.

Overall investor interest has been limited, with ~30% of assets receiving financial backing (as of June 2023). The protein & dairy ingredients segment has received the most interest from sponsors, with ~50% of identified players being investor-backed. The alternative protein niche segment presents a high risk-reward ratio for investors, as a significant amount of capital is needed to develop alternative proteins, with most still being in their infancy. However, the upside in the case of successful product development is substantial. PE-led interest in the broader food ingredients market stems from the market's underlying demand increase, backed by a growing global population and the non-cyclical nature of the food production end-market.

ESG topics primarily relate to environmental and social issues. From an environmental perspective, the broader agriculture industry accounts for ~17% of global greenhouse emissions and uses significant amounts of energy and water. To limit their impact, incumbents focus on using sustainable raw materials and limiting food waste throughout the production process. Social issues primarily revolve around working conditions throughout the supply chain. A large part of the ingredients is sourced from Asia, where working conditions are generally lower than in Europe. To ensure compliance, larger incumbents require mandatory audits for their suppliers, aside from unannounced visits to their sourcing partners to check if working conditions are met.