In This Article:
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A survey from OC&C Strategy Consultants found that merger and acquisition deals in the consumer goods industry last year increased by 45 percent from the prior year.
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Profitability for the companies surveyed was up 0.7 percent, the first increase in three years.
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M&A has helped growth rates during a time when organic growth has slowed down for major consumer goods companies.
Consumer giants, which are facing increased competition from upstart brands, are buying growth where they cannot create it. The result: a new report found deal activity in the sector reached a 15-year high last year.
Deals in the consumer goods industry rose 45 percent over the year prior, according to a survey from OC&C Strategy Consultants released Monday. The value deals of jumped 190 percent.
While the companies are all seeking growth, the deals reflect an array of strategies. Some are investing in digital companies to help more rapidly adjust to changing consumers. Others are buying companies in faster-growing regions, like the emerging markets, or within on-trend categories, like organic food.
"The balance of power has shifted as some of the traditional scale advantages that the major brand owners enjoyed (like having scale manufacturing, big salesforces, ability to advertise on TV, attract good people to work for them) have been eroded by digital technologies, which have enabled smaller businesses to grow more successfully than in the past," said Will Hayllar, co-leader of the global consumer goods team at OC&C, in an email.
Nestle NESN-CH invested in three meal subscription services: Sun Basket, Freshly and Gousto. Campbell Soup CPB shelled out $700 million for organic soup company Pacific Foods. Japan Tobacco 2914.T-JP acquired a 31 percent stake in Ethiopia's National Tobacco Enterprise.
“While the underlying challenges ... to restore organic growth and satisfy activist investors seeking margin improvement have not gone away ... [companies] are actively addressing those challenges and using M&A as a key tool to do so," Hayllar said in a press release.
The OC&C survey, now in its 16th year, analyzed the top 50 international consumer goods companies based on their 2017 sales. Last year, 10 of the 23 food and drinks companies surveyed by OC&C had declining revenue. The beer and spirits category fared better, with all seven companies surveyed by OC&C increasing revenue in 2017.
All told, consumer companies reported sales growth of only 2.6 percent last year, while volume, which strips out the impact of currency and price, inched up 0.6 percent. Including the boost from dealmaking, though, the companies grew sales 5.7 percent, the highest level since 2011.