Private Equity Funds’ bet on the Food Industry is Turning Sour

Private Equity Funds figured that staple goods like food and beverages would keep making profits as the economy soured. They bought 786 food and beverage markers worth $32 billion in 2021 using debt to pay for the purchases.
What followed was the food industry being hit hard by high labor costs, supply chain disruptions, and runaway inflation. Food and beverage manufacturers are earning less money to cover their debt. This increased the pressure on the food industry to raise prices. In 2022, processed food prices increased 14% which is four times the 20 year average.
In response to higher prices, consumers are substituting for cheaper brands and alternatives. I’ve switched to eating mostly chicken and SPAM. I haven’t had steak in months.

Most of these purchases were through leveraged buyouts where the private equity firm uses money their targeted purchase borrows. When interest rates rise, that interest expense balloons and it becomes hard to turn a profit.