Supply Chain Due Diligence: Safeguarding Value in India’s Food M&A

In India’s $600 billion food industry, supply chain due diligence is vital for successful Food M&A. This article, through a hybrid consulting lens, highlights how senior leaders can identify logistics risks, cold chain gaps, and regulatory pitfalls to safeguard deal value and ensure operational resilience.

Industry Overview & Context

India’s food sector relies on integrated supply chains logistics, cold chains, warehousing, and procurement to maintain quality and efficiency. In Food M&A, supply chain due diligence uncovers risks like weak supplier contracts or poor cold chain infrastructure that can undermine deal value and operational performance.

1. Recent Developments (as of June 2025)

India’s policy push via MoFPI, PLI, and Budget 2025 is accelerating cold chain and supply chain digitisation. For food M&A, supply chain due diligence must assess how targets leverage government incentives, comply with FSSAI’s AI-led traceability, and adopt technologies like IoT and blockchain to ensure long-term competitiveness.

2. Key Challenges in Supply Chain Evaluation

Conducting supply chain due diligence in India’s food industry involves navigating several challenges:

• Fragmented Cold Chain Infrastructure: With just 30% of perishables moved under optimal conditions, India’s cold chain remains highly fragmented. Therefore, evaluating 3PL dependence and network reliability becomes crucial in supply chain due diligences. Moreover, identifying weak links in third-party logistics can help mitigate spoilage risks and protect product quality.
• Regional Logistics Cost Disparities: Logistics costs, for instance, vary widely ranging from 8% of product value in urban centers to as high as 15% in rural areas primarily due to infrastructure gaps and fluctuating fuel prices. Consequently, understanding these regional disparities is essential during supply chain due diligences
• Supply chain due diligence must account for these disparities to avoid unexpected cost escalations.
• Regulatory Gaps in Traceability and Packaging: While FSSAI’s AI-led mandates enhance traceability, gaps in packaging standards and product authenticity claims persist, posing compliance risks. Acquirers must scrutinise a target’s adherence to these regulations.
• Supplier Concentration Risk and ESG Compliance: ver-reliance on a limited number of suppliers significantly heightens exposure to disruptions. Moreover, Environmental, Social, and Governance (ESG) compliance is becoming increasingly critical. If suppliers fail to meet ESG standards, companies may face reputational damage and regulatory penalties. Therefore, evaluating supplier diversity and ESG alignment should be a core component of supply chain due diligence.

3. Hybrid Consulting Analysis: Strategic Lens on Supply Chain Due Diligence

A hybrid consulting approach, integrating management, finance, legal, and technology expertise, ensures comprehensive supply chain due diligences. Key areas of focus include:

• Red Flags in Logistics and Warehousing Agreements: Scrutinise contracts with 3PLs and warehousing providers carefully, especially for unfavorable terms such as rigid termination clauses or escalating costs. Furthermore, weak service level agreements (SLAs) may indicate underlying operational inefficiencies. As a result, these gaps can negatively affect post-acquisition performance, making contract reviews a vital step in supply chain due diligence.
• Assessment of Supplier Quality, Contracts, and Delivery SLAs: Evaluate supplier reliability through quality audits, contract reviews, and delivery SLA performance. For instance, assessing whether suppliers meet FSSAI’s quality standards ensures a stable input stream. Supply chain due diligences must verify supplier diversity to mitigate concentration risks.
• Inventory Turnover Benchmarks, Cold Chain Mapping, and Tech Stack Audits:Assess inventory turnover, cold chain integrity, and tech stack (ERP, WMS, IoT) during supply chain due diligence to uncover inefficiencies and integration risks.
• Legal Review of Compliance with FSSAI, APEDA, and CPCB:Verify compliance with FSSAI, APEDA, and CPCB to avoid legal penalties and disruptions. Regulatory lapses can significantly reduce deal value in food M&A.

Illustrative Examples

Real-world cases highlight the importance of supply chain due diligences in food M&A:

• Frozen Food Brand with Cold Chain Gaps: In a 2024 acquisition of a frozen food brand, supply chain due diligence revealed inconsistencies in last-mile cold chain infrastructure. While primary storage facilities were advanced, third-party transporters lacked consistent temperature controls, risking spoilage. This insight enabled the acquirer to negotiate a 15% lower purchase price and allocate ₹50 crore for infrastructure upgrades, preserving deal value.
• Misleading “Farm-Fresh” Narrative: In a 2023 acquisition, due diligence revealed misleading “farm-fresh” claims tied to a single supplier. This insight helped the acquirer avoid legal risk and realign marketing highlighting the importance of supplier audits.

Conclusion

Supply chain due diligence is vital in India’s food M&A to safeguard deal value and uncover growth potential. A hybrid consulting approach helps address logistics risks, cold chain gaps, and compliance. Partnering with experts like LawCrust ensures informed, resilient acquisitions.

About LawCrust

LawCrust Global Consulting Ltd. delivers cutting-edge Hybrid Consulting Solutions in Management, Finance, Technology, and Legal Consulting to ambitious businesses worldwide. Recognised for our cross-functional expertise and hybrid consulting approach, we empower startups, SMEs, and enterprises to scale efficiently, innovate boldly, and navigate complexity with confidence. Our services span key areas such as Investment Banking, Fundraising, Mergers & Acquisitions, Private Placement, and Debt Restructuring & Transformation, positioning us as a strategic partner for growth and resilience. With an integrated consulting model, fixed-cost engagements, and a virtual delivery framework, we make business transformation accessible, agile, and impactful.

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