Food company ownership: overview
- Private ownership offers greater control and longer-term strategic planning
- Family-owned businesses often prioritise legacy, stability and patient investment
- Public companies benefit from deeper capital access and acquisitions
- Private equity owners typically focus on efficiency and future exits
- Optimal ownership depends on growth ambitions, capital needs and objectives
Whether to go public or remain private is a key dilemma for any successful business.
Many of the biggest players in food, including Nestlé, Mondelēz International and PepsiCo, are publicly traded.
But others, including family-owned giants such as Ferrero, Barilla Group and Mars, are not.
Clearly, it is possible to reach the heights of success without going public. But is staying private really the right route?
The benefits of staying private for food companies
One of the biggest benefits of remaining private is control.
When a company stays private, it retains greater control over capital allocation, timing and strategy, says Lauren Abda, co-founder at investor network Branch Venture Group.
Management can make decisions with long-term value in mind, without having to think about satisfying public markets on a quarterly basis.
Of course, private, family-owned companies must still pay close attention to results, but these results are less likely to change the business’s direction than a public company’s quarterly earnings, says Filiberto Amati, advisor at FMCG consultancy Amati and Associates.
Furthermore, private companies do not have to divulge sensitive information such as margins, customers, R&D and strategy, Abda points out.
For food companies in particular, which are often highly capital-intensive and margin-sensitive, a private structure allows them to spend time building manufacturing capacity, changing supply chains, developing new ingredients and establishing consumer brands.
Private food companies usually don’t have to follow short-lived trends or viral campaigns, says Amati. They can instead respond to long-term trends, even shaping category dynamics themselves rather than simply following in their wake.
Family-owned vs private equity-backed
Yet the benefits of being private very much depend on who owns said company, Amati points out.
Family-owned, self-financed or founder-led companies are more likely to be interested in legacy-building, and a private structure enables them to plan long-term to achieve this.
“They finance only long-term bets themselves, which has two derivative consequences: first, fewer bets, but bigger ones. Then they stick to the bet longer; they do not U-turn every few months like public companies.”
Private equity-owned companies, however, often focus on operational capability and professionalisation, and are focused on becoming more efficient and laying the groundwork for the future.
Yet because these types of shareholders often sell the company down the line, they are less interested in substantial long-term planning, at least more than a few years into the future, than family-owned companies.
As Branch Venture Group’s Abda points out, long-term planning often depends on “the time horizon of the capital behind the company”.
Disadvantages of staying private
Yet of course, staying private has many disadvantages as well, leading companies to miss out on the benefits of going public.
The most obvious disadvantage is lack of access to public capital. “Public companies can access much deeper pools of capital and use their stock for acquisitions, or employee compensation and shareholder liquidity,” says Abda. “Private companies have fewer options and can become constrained when growth requires significant investment.”
For capital-intensive businesses such as food, access to public capital can help with building new infrastructure, scaling manufacturing or even expanding internationally. Private businesses do not have this access (although, as Abda points out, strategic corporate investors can help bridge this gap).
“The clear benefit of a public company is the ability to finance through equity at a much lower cost,” Amati adds, although this may depend on where the company lists.
There are other disadvantages as well. For example, Amati points out, public companies are often better at recruiting talent than private companies.
Finally, in some instances, private companies’ “focus and ‘stubbornness’ might backfire”, says Amati.
While he is clear that focus is, in most instances, a good thing, the single-minded, “un-hedged” focus that private ownership enables can be risky. Abrupt, unpredictable market disruptions such as GLP-1s cannot be planned for in the long-term.
Is remaining private a better option today?
Remaining private is much more viable for companies today than it was thirty years ago, in Abda’s view.
This is because they have access to “a more robust private capital ecosystem” which includes private equity, growth equity, venture capital and private credit.
“The question is less ‘should we stay private?’ and more ‘what type of capital and ownership structure best supports the company we’re trying to build?’”
For Amati, remaining private is neither a better nor a worse option today than it was in the past.
He does point out that family companies sometimes go public on the fourth generation when there is no family leadership or they need to professionalise. Furthermore, some long-private companies, such as Lindt, go public in order to access better financing.
In short, remaining private gives a company more control and allows for better long-term planning, as well as enabling it to establish a legacy. However, it cuts it off from vast reserves of public capital, which can, in many instances, contribute to growth.
