global cpg sector outlook - smartcube · distribution channels the internet has allowed small...
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Trends
Sales
Manufacturing
$14trillion
2025
$8trillion
2014
Key M&A Deals2016 - 2018
Key motivations for M&A u CPG giants losing shelf space and market share due to increasing consumer preference for healthy, natural,
environment-friendly and more authentic products
u With Amazon setting the bar for consumers' online shopping expectations, CPG companies have started buying or investing in ‘non-core’ targets to improve logistics and delivery platforms
u Large CPG firms are also focusing on data analytics firms to understand and speak to shoppers better
+57.1%+7.1%+2.5%
+1.3%-0.5%-0.7%
The CPG sector is increasingly focusing on personalisation and providing convenience to customers. The sector is being driven by shifting consumer preferences toward healthier and sustainable options, emerging distribution channels and agile small brands
Sector size
Business models
Key growth categories � Beverages � Alcohol � Food
Historic
Brand presence
Distributionchannels
Pricepoint
Approach
Current
Big brands dominated retail shelves
Smaller brands with greater control over their supply chain gain market share
Big brands offered better pricepoints with high volumes andeconomies of scale
Agile brands offer better price points due to operational
efficiencies
New/small players hadlimited access todistribution channels
The internet has allowed small players greater access to
distribution channels
Universal approach to build mass-appeal and generate efficiencies
During 2010–2016, Gillette’s share of the US men’s razor marketfell from 70% to 54%, while the combined market share of start-up low cost competitors such as Dollar Shave Club and Harry’s rose from 7.2% in 2015 to 12.2% in 2016
Legacy brands can witness a sudden fall in sales if they fail to adapt to a rapidly evolving market and new agile competitors
Brands use tailored approaches to target different consumer
segments
5,150
2,766
2,486
2,379
1,732
55548690217
1. Data based on patents filed during Jan 2014 – Jan 2019. Data is not exhaustive, as patents filed from July 2017 may not have been published yet. Only 1 patent per invention has been considered, as there may be multiple patents filed in different countries to protect the same invention
InnovationCPG companies are moving towards natural and sustainable products
Buzz words for 2019
Total number of patents filed1
(Jan 2014 - Jan 2019) 2019 trendsIncreasing focus on building clean-label F&B offerings – made with pure and natural ingredients – to boost sales
Optimising e-commerce offerings
Rising adoption of green packaging and bio-based plastics
Growing utilisation of smart packaging – by integrating mobile and IoT – to strengthen brand-to-consumer relationships
SMART PACKAGING
SUPPLY CHAIN OPTIMISATION
AI-basedInteractivePlatformsMeat Analogues
Clean-labelIngredients
Supply Chain
Distribution
IoTAutomated replenishment of raw material
inventory
AI/MLImproved raw material consumption
forecasting
RoboticsAutomated manufacturing using industrial
robots
Digital traceabilityAccurate raw material source tracking
AR/VRImproved product design and development
IoTEnhanced visibility of goods across different channels
AI/MLPredictive staging
RoboticsAutomated warehouse management systems
Digital traceabilityAccurate product tracking to source
IoTPre-programmed ordering via connected devices
AI/MLDemand forecasting
RoboticsAutomated bots to assist customers in-store
Digital traceabilityProduct tracking and ensuring product authenticity
AR/VRVirtual retail store and VR demo stations in physical retail outlets
AI/MLAutomated aftersales service
RoboticsAutomated customer support
Digital traceabilityBetter monitoring of supplier quality for
warranty cases
AR/VRCustomer engagement through AR/VR
TECHNOLOGIES expected to disrupt CPG supply chain
Competitive landscape
$29.6billion
$30.4 billion
$31.9 billion
$40 billion
$47.8 billion
$54.9 billion
$57.6 billion
$64.6 billion
$66.9 billion
$90.9 billion
2.1% GrowthHQ-Switzerland
1.8% GrowthHQ-US
1.8% GrowthHQ-US
-5.1% GrowthHQ-UK/Netherlands
-1.9% GrowthHQ-Belgium
9.3% GrowthHQ-Brazil
1.8% GrowthHQ-US
-10% GrowthHQ-US
3.5% GrowthHQ-France
3.1% GrowthHQ-US
Top 10
Global CPG Companies -by sales (2018)1
Nestle P&G PepsiCo Unilever ABInBev1 JBS1 Tyson Foods
The Coca-Cola Company L'Oréal Philip Morris
International
Net Margin(%, 2014)
15.8 13.9 9.8 10.7 24.0 1.7 2.3 15.4 12.3 25.2
Net Margin(%, 2018)
11.0 16.2 19.4 18.4 12.6 0.6 4.9 20.2 14.5 26.7
Coca-Cola Colgate Maggi Lifebuoy Lay's Pepsi Nescafé Indomie Sunsilk Knorr
Market penetration (%, 2017)
41.3 61.6 30.4 27.5 29.1 22.7 22.3 4.7 23.8 27.1
YoY CRP* growth (2017)
-4 0 14 -7 6 -5 -8 -1 1 -2
R
5,817
3,886
2,489
2,375
2,0731,9711,9551,817
1,7991,748
*Consumer Reach Points (million) - measures how many households around the world are buying a brand
Revenue growth of 400 US-based leading CPG firms (July 2017–June 2018)
The number of deals for the global top 50 CPG firms jumped to a 15-year high in 2017Number of deals involving the global top 50¹, 2003-17²
Growth leaders are substantially outperforming their peers
YoY growth in USD sales
Top ten companies
All others
Large Midsized Small
Source: RI ILD POS database, 2011-2017, MULOC; IRI and BCG analysis
Note: Large is more than $5.5 billion, midsized is $1 billion to $5.5 billion and small is less than $1 billion in sales
Although small companies, on average, outperformed their larger counterparts, top- performing midsized and large companies also experienced growth
Key strategies
Key strategies followed by successful companies to distinguish themselves and drive sales growth
Differentiated product offerings
Target consumers with greater precision
Complement organic growth with M&As
Size used to be one of the most important factors of success, but e-commerce has leveled the playing field, subsequently allowing smaller brands to reach consumers in unprecedented ways.
– IRI (October 2018)
M&As
3641 41
53 5145
49 4956
51
41
60
48
3237
33 21 96 55 144 233 59 60 38 79 70 54 226 50 1453,4
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017Value USD bn
1. Undisclosed value deals are not considered2. Dates refer to the deal announcement date. Deals that have been announced in 2017 are considered
for analysis.3. 65 transactions in total by global top 50 players (41 acquisitions and 24 divestments), but 5 of these
included a global top 50 player on both sides of the deal.4. Excluded 4 deals with non-CPG purposes or deals within the same group of companies, including
Johnson & Johnson’s acquisition of biopharmaceutical company, Actelion Pharmaceuticals Ltd. LVMH’s acquisition of Christian Dior Couture S.A., Henkȩl (Adhesive Technologies)’s acquisition of (International Breweries, Intafact Beverages and Pabod Breweries).
Source: Mergermarket, Trade press, OC&C analysis.
$145 billion
Global M&A activity among the world’s top 50 CPG firms from P&G and L’Oréal to Unilever – jumped ~46%
YoY to a 15-year high of 60 deals in 2017, with total value of those deals increasing almost 3x YoY to $145 billion. This trend continued in 2018 as well and is not expected to slow down
Global M&A trends
46%YoY growth
Mead Johnson Nutrition CompanyFeb, 2017
VCAJan, 2017
Beer business (Centraland Eastern Europe)Dec, 2016
Reynolds AmericanOct, 2016The WhiteWave
Foods CompanyJuly, 2016
Pinnacle FoodsJune, 2018
Retail operations of various Starbucks' brandsMay, 2018
Blue Buffalo Pet ProductsFeb, 2018
Snyder's-LanceDec, 2017
Spreads division of UnileverDec, 2017
$17.9 billion
$8.0 billion
$6.1 billion
$8.0 billion
$7.2 billion
$10.9 billion
$12.5 billion$49.4 billion
$7.8 billion
$9.1 billion
Strategic investmentsCPG giants are increasingly investing in small–midsized specialised companies to collaboratively develop eco-friendly and healthy products, sustainable packaging and innovative marketing and supply chain solutions
Strategic investment examples by large CPG players (2017–2018)
Date Investor Target Investmentobjective
Focus product/service
Dec-18 Walker & Company
Enhance development of new products for people of colour
Health and beauty products customised for different ethnicities
Dec-18 Primal NutritionInnovation and development of healthy and environment-friendly products
Snack bars and paleo-focused food products
Oct-18 Ethical BeanInnovation and development of healthy and environment-friendly products
Environment-friendly packaged coffee
Jun-18 Bare SnacksInnovation and development of healthy and environment-friendly products
Non-GMO baked fruit and vegetable snacks
May-18 LePurInnovation and development of healthy and environment-friendly products
Premium additive-free Greek yoghurt
Dec-17 Beyond MeatInnovation and development of healthy and environment-friendly products
Plant-based meat substitute
Nov-17 NativeInnovation and development of healthy and environment-friendly products
Natural paraben-free and aluminum-free premium deodorants
Jun-17 CeltraLeverage data analytics to better understand demand and improve digital marketing content
Mobile creative management platform
May-17 Sun Basket Enhance direct-to-consumer and subscription distribution channels
Healthy, organic meals service platform
Mar-17 Bringg Leverage tech-based solutions to improve distribution supply chain
Last-mile logistics and on-demand delivery platform
To learn how our advanced analytics solutions, proactive category and procurement intelligence, and regular patent and innovation updates could help your business better understand and adapt to consumer preferences, please contact us at [email protected].
Intelligence. Accelerated
thesmartcube.com
2014 2025ForecastCAGR
5.2%
Margins declined owing to declining global sales volume and charges related to exiting the
manufacturing and distribution business
Margins fell following poor performance in the US and Brazil, and rising commodity prices
Registered increase in margins by increasing product prices, especially in developing markets
Consumers are increasingly switching to fresh foods as prepared and prepacked products are viewed as unhealthy, leading to declining CPG sales
Booming gender-neutral beauty and male personal care products driven by consumers moving away from traditional gender stereotypes
BUDGET- CONSCIOUS
MILLENNIALS
D I G I TA L T EC H N O LO GY I N F LU E N C I N G CUSTOM E RS
S H I F T TO O N L I N E C H A N N E LS
D I F F I CU LT TO CO N N ECT W I T H
CO N S U M E RS
B O OM I N G G E N D E R-N E U T R A L
B E AU T YR I S E O F
F R ES H FO O D S
Global CPG sector outlook
4 key applications of technology that will disrupt supply chainsThese are anticipated to reach maturity during the next 2–5 years and increase value add for consumers. Organisations that make these technologies an integral part of their overall business and financial strategy will be able to reap the highest gains
Aftersales
Case example
Digital technology is increasingly shaping and influencing buyer behaviours, and allowing CPG companies
to engage with customers on a personal level
Budget-conscious millennials are increasinglypurchasing cheaper own-label products
As
consumers shift to online
channels, and small and midsized brands come to the fore, large CPG
brands are losing the ability to dominate shelf space and influence purchasing decisions
Large brands are
finding it difficult to connect with consumers
who increasingly associate positive attributes such as localness, honesty, trustworthiness and sustainability with ‘small brands’
1. ABInBev and JBS sales figures are for financial year ending Sep 2018
TOP 10 GLOBAL CPG BRANDS
2018*
Forecast