Skip to content Skip to footer

Loading Results

Consumer Markets deals insights

Q1 2019

Amid uncertainty about the state of the economy in late 2018 and the beginning of 2019, the start of the year saw mixed results for mergers and acquisitions activity in Consumer Markets with the overall value of transactions showing an increase even as the number of deals was down.

The Consumer Markets segment recorded 141 deals valued at CA$5 billion in the first quarter of 2019. Comparing those figures to Q1 2018 (189 deals valued at CA$4.1 billion), deal value increased by 20.8%, while the volume of transactions fell by 25.4%. Looking further into the deals activity, there are signs of softening business sentiment. Comparing Q1 2019 to Q4 2018 (191 deals valued at CA$11.3 billion), deal value declined by 55.9%, while deal volume fell by 26.2%.

There was one mega deal in Q1 2019: Saputo Inc.’s CA$2.1-billion acquisition of United Kingdom-based Dairy Crest. Excluding the mega deal and considering the impact of the cannabis industry in driving much of the transaction activity in Canada in recent quarters, the picture does look more uncertain as it becomes clear that many companies have been holding back on new deals.

The uncertain picture and softening outlook reflect the trickle-down effect of tariff and trade issues and three interest rate increases in 2018. And despite relief on the trade front last fall with the negotiation of a new deal to replace the North American Free Trade Agreement, many companies are holding back on investment plans as they wait for ratification of the new United States-Mexico-Canada Agreement (USMCA) before making any big bets. Exactly when that will happen is unclear, as Canada is pushing the US government to lift steel and aluminum tariffs before ratifying USMCA and the deal faces some opposition in the US Congress.

Adding to the cautious sentiment are factors like the upcoming elections in Canada and early indications that measures introduced by the federal government in November 2018 to address business competitiveness and productivity, such as accelerated depreciation for investments in machinery and equipment, are falling short of expectations.

The softening outlook was a prominent theme in the latest business outlook survey from the Bank of Canada. Overall, companies are less optimistic about demand and are reporting moderated sales growth.

On a positive note, the Bank of Canada found respondents in the service sector to be relatively upbeat, with investment and employment intentions remaining healthy. And amid the talk of a possible slowdown, the Bank of Canada has held off on raising interest rates this year. Economists generally agree that with real GDP growth expected to be in the 1.2% range in 2019, further rate hikes are unlikely this year, which should give both consumers and businesses time to adjust to previous increases.

With that in mind, what have companies in Consumer Markets been focusing on in Q1 2019?


Amid the ongoing uncertainties, a number of companies have been exploring partnerships as a potential alternative to mergers and acquisitions. The approach helps companies respond to changing shopping and consumption patterns and gives them a reliable option for sharing risks and rewards.

For example, Walmart Canada is collaborating with Sleep Country Canada Inc. to offer its mattress-in-a-box collection online and with Freshii Inc. to sell prepared food products at 100 of its Canadian stores.

Other partnerships announced in Q1 2019 include Endy’s arrangement with Urban Barn to help customers experience Endy mattresses before ordering them online.

In the cannabis sector, Alimentation Couche-Tard Inc. announced a multi-year strategic partnership with Canopy Growth Corp. Through the partnership, the companies plan to make use of one another’s expertise and respective strengths to make a foray into the cannabis retail landscape.

It’s not just established companies that are focusing on partnerships. Earlier in 2019, for example, Toronto-based PayBright, a financial services and technology company, announced a collaboration with Klarna, a payment provider that offers flexible payment options to consumers at online and in-store checkouts.

Adding convenience to experience

As companies continue to focus on experiences to entice consumers, they are also looking to inject added convenience to their services.

Earlier this year, Cadillac launched Cadillac Live, which allows customers to have video conversations with representatives before buying a car. The representatives can physically show customers the car and answer questions before directing them to a nearby Cadillac retailer.

The focus on convenience is especially strong among companies in the grocery and consumer durables segments. Sobeys Inc., for example, is planning to expand the presence of its newly acquired Farm Boy brand across the Greater Toronto Area with more urban-style stores. Ikea is also venturing into smaller urban stores as it seeks to respond to changing demographics by focusing on offering a holistic, omni-channel experience in which customers can seamlessly shop online and access home delivery and installation services.

Shifting landscape for malls

The changes underway in the retail sector continue to have a trickle-down impact on the real estate industry as the occupant mix in malls undergoes a shift toward tenants like fitness centres, restaurants and businesses focused on experiences. In 2019, the emerging shift is toward adding office space in malls.

Trends to watch

There were further developments in the cannabis industry in Q1 2019.

Besides Canopy Growth’s partnership with Couche-Tard, Namaste Technologies Inc., a cannabis e-commerce company, signed an agreement to acquire a 49% stake in Choklat Inc., a Calgary-based premium chocolate manufacturer. The acquisition marks Namaste Technologies’ movement into the edibles market as companies await further cannabis regulations allowing for them. Namaste Technologies also acquired CanMart Ltd., a UK-based pharmaceutical distributor, in Q1 2019.

Other cannabis companies making moves include Tilray Inc., which acquired Fresh Hemp Foods Ltd. (doing business as Manitoba Harvest) for CA$419 million and Ontario-based Natura Naturals Holdings Inc. for CA$70 million in Q1 2019.

A significant factor in some of the deals activity is the passage of the US Agriculture Improvement Act of 2018 and the impact on hemp-derived products. Many companies are now making moves across the supply chain to capture the cannabidiol-infused food market. Tilray, for example, plans to make use of Manitoba Harvest’s manufacturing facility in Canada to establish its presence in the cannabidiol market.

Recent changes introduced by Health Canada to Canada’s food guide could also be a factor in upcoming deals activity. The update included a reference to eating plant-based proteins more often.

In February 2019, Beyond Meat Inc., a Los Angeles-based food company that specializes in plant-based meat substitutes and has already seen success through its relationship with A&W, signalled plans to forge additional partnerships in Canada. Beyond Meat will now offer its burritos at Quesada Burritos & Tacos and is expanding its existing relationship with A&W by offering a breakfast sausage patty in addition to the Beyond Meat burger.

Several large global food companies have been adding to their plant-based protein offerings, a trend Canadian businesses are embracing as well. Lightlife Foods Inc., a subsidiary of Maple Leaf Foods Inc., announced a new plant-based burger in Q1 2019. Loblaw Cos. Ltd. has signalled plans to introduce up to 30 private-label plant-based protein products to its product offerings.

As this trend takes root, the lack of an existing large Canadian player in the market for plant-based protein products could affect how deal activity in this area plays out. Instead of making acquisitions in Canada, large companies may follow Maple Leaf and Loblaw in either making acquisitions elsewhere or launching their own products.

When it comes to deal activity, companies that were already active in 2018 continued to lead the charge in Q1, 2019, particularly when it comes to the global sphere.

In February 2019, Saputo announced its deal to acquire Dairy Crest, one of the largest cheese makers in Britain. The deal comes as Canada has agreed to rising cheese imports from the European Union in the coming years as a result of the Canada-European Union Comprehensive Economic and Trade Agreement.

In other moves, Canada Goose Inc. announced plans to open six new stores. Besides three new locations in Canada, two will be in Europe and one in the United States.


Consumer Markets quarterly deals insights

Contact us

Michelle Pickett

Michelle Pickett

Deals Lead Partner, TMT & Consumer Markets, PwC Canada

Tel: +1 416 815 5002

Brooke Valentine

Brooke Valentine

Partner, PwC Canada

Tel: +1 416 687 8141

Follow PwC Canada