Organic Growth vs. Acquisition: Choosing the Right Path for Your Pet Food Business
Organic growth – while deeply satisfying as you steadily build your business is the traditional path to scaling up. It allows you to better meet customer demand and benefit from economies of scale. However, it can be a slow process, with maybe only single digit growth YOY.
In the early stages, you might not have the capital to invest in your own manufacturing line. You may rely on third-party producers to make your product or even start by crafting small batches in your own kitchen. While outsourcing can offer healthy profit margins due to scale, it may come at the cost of product customisation. You risk losing the unique identity that made your pet food special in the first place.
That first major investment – in your own manufacturing capability is a crucial milestone. You need confidence in your growth timeline. Typically, this growth follows a steady year-on-year improvement, with sales showing a consistent upward trend month by month.
However, increasing production capacity doesn’t always scale incrementally. For example, Line 1 may produce 100 tonnes per month, but adding Line 2 could instantly double that to 200 tonnes. Because your growth is steady rather than explosive, it may take several months before you fully utilise that additional capacity.
The Alternative: Growth Through Acquisition
An alternative to organic growth is acquiring another business – buying both its sales volume and manufacturing capacity. In the pet food industry, 95% of acquisitions involve purchasing a brand or its production volume, with a manufacturing facility included.
Ideally, an acquisition provides not only additional volume but also spare capacity and the technical capabilities to produce your product.
At 4P Management Ltd, we’ve advised on six diverse acquisitions, and our role is to support purchasers with technical due diligence (TDD). Key questions we help you answer include:
- Is the facility capable of producing your pet food alongside its existing lines?
- Does it have the spare capacity to meet your growth goals?
- What is the current technical condition of the plant?
- Will additional investment be needed to ensure compliance?
- Are there opportunities to expand—e.g., space for another line, or upgrades to increase output?
- What are the strengths and limitations of the existing workforce?
- Where are the production bottlenecks?
Ultimately, you must determine whether the acquisition is a good fit for your business. Is the multiple you’re paying on turnover good value for money? That question can only be answered with complete commercial and technical insights.
What About a Merger?
A merger differs from an acquisition. It involves two companies coming together, combining operations and resources. This often leads to overhead savings by eliminating duplicate roles or processes. However, a merger must be strategically compelling. For instance, one company is strong in wet pet food, and the other in dry. Together, they can offer a more complete product range to customers.
How We Can Help
At 4P Management Ltd, we support businesses on their growth journey. Whether you’re considering an acquisition or merger, we provide independent, expert advice on the technical aspects of your investment.
If you’re exploring growth opportunities and want confidence in your next move, get in touch with us.
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