Nut Processing: A Multibillion-Dollar Opportunity With Room to Grow

Learn more about the Harris Williams professionals featured in this article.

As consumers seek healthier diets, desire is higher than ever for foods rich in protein, fiber, and other nutrients. At the same time, there is a rising consumer preference for more sustainably grown and plant-based foods. These trends are increasing demand for nuts—on their own and as an ingredient—and will support growth for years to come, providing an expanding set of opportunities for investors.

Here, senior bankers from the Harris Williams Consumer Group share key trends creating interest in the space, which company traits are crucial to win, and advice for investors looking to get involved.

Long-Term Growth Potential

Nut processing is a multibillion-dollar industry that continues to grow across retail, foodservice, ingredient, and export channels. As the global food market demands more nuts, producers are meeting that expanding need with the total supply value of tree nuts up 34% since the 2013/2014 crop season.¹

This positive trajectory of the nut market is being driven by several consumer tailwinds. “Consumers have an increasing desire for plant-based, high-protein, and heart-healthy foods that contribute to a healthy, active lifestyle,” says Alexander. “They’re also becoming more aware of what they’re putting in their bodies and the environmental impact of getting products from field to fork.”

As these factors keep rising in importance, nuts are in a prime position to take advantage of them. In fact, many nut producers are carbon negative, with -0.8 greenhouse gas emissions per 100 grams.² 

These trends have resulted in increased consumption of nuts per capita, which is being further fueled by innovation. Beyond the snacking and bakery aisles, trial-worthy innovation can be seen in other areas of the retail store as well as food service.

The U.S. has led and continues to lead world tree nut production, with an average share of 48% from 2018 to 2023.¹ Cash explains: “The U.S. is a leading producer and exporter of nuts with the infrastructure and international reputation in place to support the industry’s rising demand and growth.”

Cash adds that the domestic consumption in the U.S. also leads the world and still has room to grow. “Nuts grown and processed in the U.S. are viewed as premium, which provides significant growth opportunities as nut consumption expands globally,” he says.

There are also several opportunities to cultivate the next multibillion-dollar nut category. Almonds and pistachios, for example, began as nascent markets but are now part of everyday life thanks to product innovation, marketing, and branding. Since 2015, almond consumption per capita in the U.S. has risen by 18%, while pistachio consumption has more than tripled over the same period.³

“What Wonderful did in pistachios and Blue Diamond has done in almonds through innovation and a push into snacking has been very impressive,” says Warczak.

“There is substantial white space in the market to increase demand for other types of nuts such as walnuts, pecans, and cashews. These other nuts are inherently versatile in their uses and contain the same attractive characteristics that align with consumer eating and lifestyle trends,” notes Warczak. “What’s promising is that elsewhere in the world, many nuts, such as walnuts, are consumed predominantly for snacking versus being mainly used for baking in the U.S. There is no reason it can’t be the same in the U.S.,” he adds.

Key Differentiators

Alexander points out that assets with a strategic presence across the supply chain are highly valuable: “These integrated players can lock in supply to meet rising demand and have the visibility and capabilities to direct that supply to the highest and best use.”

“This may mean directing supply into value-added snack products in retail or making the decision to push it through the export channel,” adds Cash. “Bottom line: Having scaled access to multiple sales channels rewards integrated players through more stable and higher margins,” he says.

“What’s unique about tree nuts in the U.S. is how the crop price is set and flows through the supply chain. Almonds, pistachios, and walnuts are all held on consignment by handlers and processors. The final price is settled once nearly all the crop is sold with the floor being set by export markets,” says Alexander. “Nut processors are provided with a minimum spread on export products. This dynamic provides nut processors financial stability, helps with cash flow as payments are made over time, and creates an opportunity to margin up the business through further processing and brand development,” he continues.

Innovation is another key component of top-performing nut processors. Those that can create new and interesting products for the widening range of nut applications can create more consumer demand and gain market share.

“Nuts are a perfect carrier for flavors consumers love,” explains Warczak. “We’re seeing a wide range of savory and sweet products, popular pairings with other healthy foods like dried fruits, and fortification with vitamins to super-charge their health benefits. Outside of snacking, there’s also innovation in baking mixes, pie crusts, coatings, breadcrumb alternatives, and dairy substitutes.”

“Consumers continue to ask for more flavors, formats, and supply chain transparency,” says Furseth. “In turn, this has made retailers, chefs, and food manufacturers desire more from their suppliers. The leading companies bring innovation and growth to grocery aisles, restaurant menus, and food products,” he adds. In retail, given the prevalence of private label with 44% of the category, nut providers that can offer both branded and private label solutions, and act as a category manager for their customers, are the best positioned to win going forward.⁴

Blossoming Investment Opportunities

M&A activity and interest from financial buyers is increasing rapidly in nut processing. Alexander states that it’s attractive to invest behind the mega-trends in food while avoiding betting on an emerging brand that is only in one channel. “Scaled nut providers with diverse end markets and capabilities offer a great opportunity in this regard,” he explains.

“There’s also substantial white space for companies in select nut categories to replicate what existing leaders, like The Wonderful Company and Blue Diamond, have done in their respective nut types. Those that can bring interesting and engaging products to market that match consumer trends and meet expanding use cases will be in a great position to capture market share and grow the overall market,” says Cash.

Lastly, the industry remains highly fragmented with many family-owned businesses across the value chain. “The market has yet to be institutionalized with significant opportunity for consolidation and platform-building to create vertical integration, professionalization, and scale,” says Alexander.

A Harvest of Value

Continued growth of the nut processing segment, driven by several industry and consumer tailwinds, is generating significant opportunities throughout its key channels of retail, foodservice, ingredient, and export. Platforms with a multi-channel strategy, scaled production, and innovative products will be particularly well suited to capitalize on the market’s rising demand and significant white space.

For further discussion on M&A opportunities in nut processing, please contact our senior professionals.

1. INC Nuts & Dried Fruits Statistical Yearbook (2022/2023) 

2. https://ourworldindata.org/less-meat-or-sustainable-meat 

3. USDA Yearbook (11/7/23) 

4. SPINS MULO, Natural, and Convenience L52 ending 10/08/23