Bringing Staples M&A in focus

Bringing Staples M&A in focus

by Pininvest Analysis

Consumer Staples, a troubled partnership on

  • constituents
  • 15.0% 1y performance
  • 12.2% volatility
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In a low inflation environment, confronted with shifting consumer expectations and growing on-line competition by Amazon and others (such as Dollar Shave Club), the food and personal care conglomerates are running out of tried-and-true marketing responses and production reorganizations

The practice of new or improved products, supported by media advertising support and introduced at a higher price point, can only go so far and is fast becoming a forlorn hope in a low inflation environment and with consumer expectations geared towards ‘natural’, plain and healthy products

Reorganizations have been pushed quite far over the years and, while robotics may add another layer of savings, the case for cost cutting to maintain margins may well become weaker

The conundrum confronting the food conglomerates takes on extra urgency for Brazilian investment firm 3G Capital, which made a virtue out of streamlined production

Dominating in the global beer industry (ABInbev Anheuser-Bush SAB-Miller), strong in the food & beverage market (Burger King and Tim Horton’s of Canada and in the food industry (Heinz-Kraft), 3G is running out of acquisition targets to generate cost savings and power growth of the portfolio

The failed attempt by 3G Capital to acquire Anglo-Dutch Unilever in 2017 made a point but, more significantly, it posits the urgent need of Staples Industry to refocus their business model