About 6 years ago, I was having a heated debate with a group of colleagues from my former employer - Reckitt Benckiser. We were reacting to a report in the press that day concerning the possibility of Reckitt-Colgate Palmolive merger. My view on the FMCG landscape was the rule of 4. In the end (I mean as our lives approach infinity if ever there was a phrase like that !) every FMCG category would have the space for only 3 or 4 big players, 3 or 4 big suppliers and 3 or 4 big retailers. The Omnicom-Publicis merger is another example of this long term trend. So my prediction is that the end state would look like:
FMCG branded players
Food - Nestle, Unilever & Mondelez/Pepsi snacks combined (and 1 player from emerging markets), Danone/Kelloggs/General Mills combine maybe ?
Beverages - Pepsi, Coke and Nestle
Beer: SAB Miller, AB Inbev, Heineken and Tsingtao
Household products: P&G, Unilever, Colgate Palmolive-Reckitt combine, SCJ (possibly folding into Unilever)
Retailers - Amazon, E-Bay, Walmart and Carrefour
Agency Suppliers - WPP, OmnicomPublicis, IPG/Dentsu
Why do I say this ?
The FMCG industry is increasingly finding it difficult to sustain innovation (and will continue to do so) as technology improves the speed with which Private Label brands will copy innovation and bring down prices and margins. Further, retailers will continue to press smaller FMCG players to cut their margins and increase payment terms thus weeding out the smaller players from the market. This will in turn further increase the power of the retailers. Moreover the rapid rise of Amazon will force out many of the smaller retailers from the market.
The FMCG players will retaliate and to balance this power of the retailer, we will see more and more M&A as smaller and mid sized players will merge with each other or be taken over by the biggest players. Gillette being purchased by P&G and Mondelez acquiring Cadburys - all in the last 10 years bear testimony to my predictions.
Finally as FMCG players get bigger - they will demand better and cheaper services from their agencies. And hence to complete my theory - smaller agencies will no longer be able to deal financially with these requests and eventually fold up or seek to merge.
And as power shifts to agencies and FMCG players...what do you get - more consolidation within the retailer space and the merry go round goes on and on and on...
Simple theory or conspiracy theory....you decide.
FMCG branded players
Food - Nestle, Unilever & Mondelez/Pepsi snacks combined (and 1 player from emerging markets), Danone/Kelloggs/General Mills combine maybe ?
Beverages - Pepsi, Coke and Nestle
Beer: SAB Miller, AB Inbev, Heineken and Tsingtao
Household products: P&G, Unilever, Colgate Palmolive-Reckitt combine, SCJ (possibly folding into Unilever)
Retailers - Amazon, E-Bay, Walmart and Carrefour
Agency Suppliers - WPP, OmnicomPublicis, IPG/Dentsu
Why do I say this ?
The FMCG industry is increasingly finding it difficult to sustain innovation (and will continue to do so) as technology improves the speed with which Private Label brands will copy innovation and bring down prices and margins. Further, retailers will continue to press smaller FMCG players to cut their margins and increase payment terms thus weeding out the smaller players from the market. This will in turn further increase the power of the retailers. Moreover the rapid rise of Amazon will force out many of the smaller retailers from the market.
The FMCG players will retaliate and to balance this power of the retailer, we will see more and more M&A as smaller and mid sized players will merge with each other or be taken over by the biggest players. Gillette being purchased by P&G and Mondelez acquiring Cadburys - all in the last 10 years bear testimony to my predictions.
Finally as FMCG players get bigger - they will demand better and cheaper services from their agencies. And hence to complete my theory - smaller agencies will no longer be able to deal financially with these requests and eventually fold up or seek to merge.
And as power shifts to agencies and FMCG players...what do you get - more consolidation within the retailer space and the merry go round goes on and on and on...
Simple theory or conspiracy theory....you decide.
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