The protein race is hotting up, and the industry’s biggest names are diversifying their portfolio mixes as consumer health and wellness expectations evolve.
While protein call-outs generate value for brands, shoppers are more discerning about what protein-rich products should offer. This is accelerating the shift from protein counts to holistic nutrition, where protein is served up alongside fibre, low sugar and other natural ingredients.
Packaged goods in the health and wellness space increasingly require careful positioning on the market to succeed. It’s not enough to get the format right if the product doesn’t explicitly support specific occasions. To stand out, a protein shake needs be a meal replacement, a pre-workout fuel, or a weight management solution, rather than just a format.
Food majors know that – and they are getting firmly in the frame of benefit-driven nutrition to capture this growth opportunity.
Danone is snapping up meal replacement brand Huel; Nestlé has just acquired Germany’s ‘smart food’ brand Yfoods, and earlier this week, Lactalis bought UK-based active nutrition company Protein Works.
While both Danone and Nestlé have several consumer-facing brands in this space, Lactalis’ infant, clinical and sports nutrition business has mainly focused on B2B, with the exception of its Picot infant formula and Delical nutritional powder brands. Acquiring Protein Works allows the world’s richest dairy company to expand its reach into this growing and lucrative space through a company that’s built a diverse portfolio and has a foothold in the direct-to-consumer (DTC) channel.
As for the British company, its ascent has gained a loyal following and garnered national media attention, but a look at its recent balance sheets reveals why the timing of the deal makes sense.
While Protein Works (which is formally registered as Class Delta Ltd in the UK) improved its cash position, its operating and administrative costs in the last year increased more sharply than its turnover, eating into the firm’s year-end profit. The company also completed a major operational upgrade, unveiling a vertically-integrated hub near Liverpool, into which it invested around £10 million.
Crucially, joining Lactalis would enable the brand – which will retain its identity post-acquisition – to leverage the dairy major’s international market reach.
Laura Keir, CEO of Protein Works, said the move “allows us to accelerate the growth of the Protein Works brand and reach new customers, whilst providing new expertise to the group as a whole”.
Nicola McQuaid, portfolio partner at YFM which was Protein Works’ equity backer, said the company’s 10.8x cash multiple “reflects seven years of our hands-on partnership”.
“We identified the opportunity, backed the brand’s move to serve a mainstream lifestyle nutrition customer, supported the PW Campus investment and the team’s continued push into international markets, taking the business from £13m to £55m in revenue and building something that ultimately attracted the world’s leading dairy company.”
Emmanuel Besnier, chairman of Lactalis, added that the acquisition would “strengthens our position in the fast-growing active nutrition market”.
“By combining our longstanding expertise in dairy proteins and health nutrition with Protein Works’ strong brand and innovative approach, we are confident we can continue to create products that respond to changing consumer expectations in this dynamic and growing category.”
So what’s next?
Protein Works may not yet match the reach of Huel, but its portfolio breadth may turn into a compelling commercial opportunity in the hands of Lactalis.
The UK-based company’s offering is underpinned by three core formats – shakes, food and snacks, and supplements – which then comprise a variety of functional products. These include complete nutritional shakes; shakes that are GLP-1-friendly; vegan; energy-boosting; and formulated to support muscle health, among others.
Then there is a range foods and snacks, from protein-packed formats to sweet, savoury and breakfast snacks, cake mixes and even ready meals for busy lifestyles. All this is primarily sold DTC, giving the brand control over logistics and customer experience while strengthening brand equity.
And so, by acquiring one company, Lactalis is strengthening its position across a range of functional food and beverage categories while gaining a nutritional platform positioned for future growth.
The industry’s functional nutrition play
Lactalis’ strategic move reflects what many of its industry peers have been doing. Beyond buying Huel, Danone has released a meal replacement product under Alpro and bolstered its clinical nutrition expertise by acquiring Kate Farms in the US.
Nestlé has also sharpened its focus on functional nutrition. The Swiss major was first-to-market with a GLP-1-friendly range in the US; and now in Yfoods, it owns a functional nutrition brand that’s already expanding across Europe.
In the US, Greek yogurt major Chobani bought Daily Harvest, a DTC ready-meals business that’s challenging the ultraprocessed frozen meals market through nutritionist-formulated products and natural ingredients.
Lactalis could take Protein Works in multiple directions – strategically introducing its ranges on international markets, or leveraging the team’s know-how to produce functional formats into its existing branded portfolio.
One thing is clear though – there will likely be enduring appetite for products that pair nutritional value and convenience for years to come.
