Target Information

Avallon MBO has signed an agreement to acquire 100% of the shares of MPPK Group, pending approval from UOKiK. MPPK Group is recognized as a leader in the pet food industry in Poland, specializing in both dry and wet foods for premium and mid-premium market segments for dogs and cats. Established in 2013 in Szymanów, Lower Silesia, the company has built a diverse product range designed for pets, under well-known brands such as Wiejska Zagroda and Pan Mięsko, complemented by its distribution of brands like Alpha Spirit and Primal Spirit.

With plans to expand its product line and secure additional partnerships, MPPK Group is committed to scaling its operations. Future growth strategies include the potential acquisition of stakes or forming alliances with other high-quality pet food manufacturers. In 2022, MPPK Group achieved revenues of 110 million PLN, reflecting a remarkable year-on-year growth of 49%. The majority of its sales are driven by its flagship brands, Wiejska Zagroda and Pan Mięsko, which focus on high-quality, nutritious pet foods without content like grains and artificial preservatives.

Industry Overview in Poland

The pet food industry in Poland is currently in a growth phase. As pet ownership increases, domestic pets are increasingly viewed as family members, influencing purchasing decisions that prioritize quality in pet food. Consumers are becoming more educated about the nutritional needs of their pets, often seeking grain-free and health-beneficial products that use high-quality ingredients. Despite Poland having the sixth-largest dog population in Europe, the market for ready-made pet food here remains relatively nascent compared to Western Europe. For instance, only about 35% of dogs in Poland receive ready-made food, contrasted with higher percentages in countries like Belgium and Germany.

The global pet food market surpassed $113 billion in 2021 and is projected to grow at a CAGR of 5.1% by 2027. Specifically, the retail sales of dog food in Poland reached 3.1 billion PLN in 2023, set to rise at a CAGR of 7% to an estimated 4.4 billion PLN. MPPK Group, with a market share close to 4% in Poland, is well-positioned for growth within this expanding landscape.

Investment in pet food has become increasingly attractive due to shifting consumer behavior, influenced by public awareness of the health implications of nutrition on pets. This trend represents an evolving market dynamic, offering new entrants opportunities to innovate and capture further market share.

Rationale Behind the Deal

This acquisition marks a strategic move for Avallon MBO, as it diversifies its portfolio into the pet food industry. According to Izabela Ciąćka, the investment manager responsible for orchestrating the acquisition, this deal aligns with their objective to penetrate new market sectors, including IT and modern food industries. With the continued growth potential of the pet food sector, Avallon recognizes the increasing demand for quality pet nutrition products.

Furthermore, as societal norms evolve regarding pet ownership, Avallon identifies significant profitability potential in catering to the growing consumer preference for premium pet foods. The strategic acquisition will bolster MPPK Group’s capabilities in expanding its product offerings and capturing a larger market share.

Investor Information

Avallon MBO is a private equity fund known for pursuing value-driven investments in various sectors, including food and industry. With its acquisition of MPPK Group, the fund has now reached eight transactions under its third fund, Avallon MBO Fund III. This acquisition demonstrates Avallon’s commitment to exploring high-potential market segments, guided by a focused investment strategy aimed at long-term returns.

The fund continues to maintain a robust portfolio, including companies in food, marketing, IT, and more. Avallon MBO seeks to leverage its industry expertise and network to enhance the operations and outcomes of companies like MPPK Group, driving further innovation and market development.

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The acquisition of MPPK Group by Avallon MBO appears promising, as it positions the fund within a rapidly growing segment of the pet food market. The growing trend of treating pets as family members aligns perfectly with MPPK's high-quality product offerings that cater to discerning pet owners. Given the market's youth relative to Western European countries, there is substantial room for growth, which could yield significant returns for investors in the coming years.

Further, the venture into premium and mid-premium pet foods is timely, as consumer trends are gravitating towards healthier and more nutritionally balanced options. Avallon’s strategy to widen MPPK's product portfolio to include more cat food and various treats indicates forward-thinking adaptability to market needs.

As the pet food market continues to expand, the potential for MPPK Group’s products to capture larger segments of consumer demand supports a favorable outlook. With capital investment from Avallon, MPPK is well-positioned to innovate and meet market expectations, making this acquisition a sound decision from a financial standpoint.

In conclusion, the acquisition of MPPK Group by Avallon MBO is a strategic investment that leverages both market trends and growing consumer awareness in the pet food sector. The realized synergies in product offerings and market approach are likely to yield positive results and establish MPPK Group as a strong competitor in the industry.

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