Editor's Note: We welcome William Hood, a well-known banker to the nutrition and health and wellness industries, as a resident expert on mergers and acquisitions (M&A) in the natural products industry. This is his first column to set the stage for what will be a monthly look at what's happening and what it all means.

On Oct. 6, in his first major move as CEO, Steve Cahillane announced thatKelloggagreed to acquire Rx bar for $600 million. "Adding a pioneer in clean-label, high-protein snacking to our portfolio bolsters our already strong wholesome snacks offering. RXBAR is an excellent strategic fit for Kellogg as we pivot to growth. With its strong millennial consumption and diversified channel presence including ecommerce, RXBAR is perfectly positioned to perform well against future food trends."

Mergers and acquisitions in the nutrition and health and wellness industries are at an historic high.  According toNutritional Capital Network(NCN) 436 M&A and financing transactions have been announced between January and June of 2017, which is up 33% from the same period in 2016 and compares very favorably to a total of 715 transactions during the entirety of 2016, 627 in 2015 and 383 in 2015.

This certainly points to a record year in 2017 with a string of larger transactions including:Danoneclosing on its acquisition of White Wave,Amazon’sacquisition of Whole Foods, theNature’s Bountysale to KKR, the Holland & Barrett sale to Letter1 Retail, Campbell’s acquisition ofPacific Foods(which could be in jeopardy) and smaller deals like Kellogg’s venture arm acquiring Bright Greens, General Mills venture arm acquiring D’s Naturals andHain’s Celestial's Cultivate Venturesacquiring The Better Bean Co.

What is driving this activity, who are the players buying businesses, and who are the companies being sold? These are questions that this monthly column will seek to answer.

But to do this we first have to take a little trip back in time…

Thirty years ago,Natural Products Expo West, the leading trade show in the natural industry, was significantly smaller than it is today. In 1987 only 9,400 people attended the show in Anaheim, tie die shirts and hacky sacks were still very common on the trade show floor, and the main event was the evening concert. Suits and ties were very rare and only a handful of intrepid private equity investors and corporate development executives from large global consumer packaged goods companies could be seen sticking out like sore thumbs among the passionate evangelists hawking their natural goods.

In 2017 a staggering 80,000 people paid to attend the trade show and the halls are crawling with legions of private equity investors, corporate development executives and bankers, although many of them now wear jeans to look the part and talk the talk (but don’t be fooled).  And many of the exhibitors are as interested in their advances as they are in the attention from retailers.

What happened that led to this influx of suits and deal makers and this shift in culture?

According to Nutrition Business Journal, over the past ten years natural products industry (including natural and organic foods, functional foods, dietary supplements and natural personal care and household products) grew from $88 billion in 2006 to $ 194 billion in 2016, representing a compounded annual growth rate of approximately 9%.

Natural and organic foods are leading the charge with a growth rate closer to 12%. This compares to standard packaged food that is currently growing at approximately 2.5%.  At a certain point large CPG companies woke up to the fact that the natural products industry was no longer for fringe Californians, that the movement was going mainstream, that the consumer demanded healthier, more sustainable options.  And these same companies realized that they were not set up culturally to address this shift organically. They realized that their only hope of participating, and addressing the sluggish growth of their legacy brands was to acquire growing natural brands.

At first they were picky and spoiled, roaming the floors of Expo West and other trade shows and dismissing the young brands with $25 to $100 million in revenue, and only looking for scale businesses. This led them to miss out on many opportunities to private equity firms like TSG, VMG and L Catterton and focused strategic rivals like Hain Celestial. And now they will buy brands much earlier in the life cycle, and many like Nestle, Danone, General Mills, Campbell and Kellogg have even set up venture type funds to participate very early with a first right of refusal to acquire the brands once they reached critical scale.

In coming months, we will update readers on new mergers and acquisitions activity, as well as continue to peel back the onion on past activity by analyzing select key deals and what drove the appetite, competitive psychology and ultimately valuation.

(Published on WholeFoods Magazine Online, 10/16/17)

William Hood is the managing director of William Hood & Co., a New York-based investment bank with a focus on health and wellness. He can be reached at whood@williamhoodandcompany.com