NOTE: THE VIEWS PROVIDED HERE ARE ENTIRELY MY OWN. IN NO WAY DO THE POINTS MENTIONED HERE REPRESENT THE VIEWS OF MY CURRENT OR FORMER EMPLOYERS.
Welcome back to Omnikarma and Thank you for visiting my little blog page. Where the banter is usually around football, marketing, wine, leadership and music - usually in that order. It has been a while since I posted here - but most of my friends and colleagues know that I am super busy with the release of my first book - 'Building the Perfect Beast - What really happens in Brand Management'. (https://www.facebook.com/BTPerfectBeast/). More about this later - but today I wanted to provide my views and predictions on a topic that I first wrote about in 2013. i.e. the changing global dynamics in the FMCG industry and how further consolidation is playing out and expected to play out in the coming weeks and months.
In case you have been on a vacation to Mars and didn't have access to the media, here are some of the major developments in the FMCG M&A space since October 2015 (the last time I provided an update on this topic):
February 2016: Nestle SA agreed to buy out minority shareholders of Osem Investments Ltd., Israel’s largest publicly-traded foodmaker, for about 3.3 billion shekels ($844 million), returning to acquisitions in the industry after a series of divestments. Osem, which makes Cheerios breakfast cereal, hummus and a peanut-butter-flavored snack called Bamba, is Nestle’s biggest food acquisition since 2012, according to data compiled by Bloomberg.
March 2016: Keurig Green Mountain, Inc. and JAB Holding Company today announced the successful completion of the acquisition of Keurig Green Mountain by a JAB-led investor group.
August 2016: Wal-Mart Stores, Inc. and Jet.com, Inc. today announced they have entered into a definitive agreement for Walmart to acquire Jet for approximately $3 billion in cash, a portion of which will be paid over time. Additionally, $300 million of Walmart shares will be paid over time as part of the transaction. The acquisition will build on and complement the significant foundation already in place to serve customers across the Walmart app, site and stores and position the company for even faster e-commerce growth in the future by expanding customer reach and adding new capabilities.
October 2016: Coty Inc. announced today that it has completed the merger of The Procter & Gamble Company’s fine fragrance, color cosmetics, salon professional and hair color and certain styling businesses (“P&G Specialty Beauty Business”) into Coty. Coty is now the third-largest beauty company in the world, with approximately $9 billion in revenue. As a combined company, Coty will also hold the number one position in fragrances, and number two and three positions in salon hair and color cosmetics, respectively.
October 2016: Asahi Group has acquired Miller Brands UK, adding premium brands like Peroni Nastro Azzurro, Grolsch and Meantime to its portfolio of beers. The Japanese brewer’s investment in the new company and the acquisition of Miller Brands, which will become Asahi UK, is part of Asahi Europe’s strategy to lead the development of the continent’s super-premium beer sector, the company said.
November 2016: WPP announces that it has acquired, subject to regulatory approval, Promotion Execution Partners, LLC, a project management and procurement company that oversees shopper marketing promotions for clients, in the US. The acquisition continues WPP’s strategy of investing in high-priority segments, such as shopper marketing and e-commerce, and important markets, such as the US. According to the Association of National Advertisers, spending on shopper marketing is projected to grow to US$18.64 billion from 2016 to 2020, a 5.8% CAGR.
January 2017: Britain's biggest retailer announced that it was merging with Booker, the UK's top food wholesaler, in a £3.7bn deal. In a joint statement, the two companies said that the combined group would bring benefits for consumers, independent retailers, caterers, small businesses, suppliers, and colleagues, and deliver “significant value to shareholders”.
January 2017: Walgreens Boots Alliance, Inc. and Rite Aid Corporation today announced that they have entered into an amendment and extension of their previously announced definitive merger agreement under which Walgreens Boots Alliance will acquire all outstanding shares of Rite Aid, a U.S. retail pharmacy chain.
February 2017: Heineken N.V. announces today that it has entered into an agreement with Kirin Holdings Company, Limited to acquire Brasil Kirin Holding S.A., one of the largest beer and soft drinks producers in Brazil. The transaction will transform HEINEKEN's existing business across the country by extending its footprint, increasing scale and further strengthening its brand portfolio. On closing, HEINEKEN will become the second largest beer company in Brazil, with a stronger commercial platform from which to capture future profitable growth in an exciting beer market.
February 2017: Kraft Heinz announced on Friday a proposed $143 billion merger with Unilever in what would be one of the biggest deals ever (Note: the deal was subsequently dropped).
There are 5 common and recurrent themes across a number of these developments:
1. Margin improvement/Premiumisation
2. Need for Scale (in a world of falling demand) & Bargaining power in the industry
3. Key individuals, companies and families driving the consolidation
4. Emerging markets
5. E-commerce and digitalisation.
I think all points above are fairly self explanatory but Point 3 needs special mention. I call out the amazing fact that around 15 individuals are leading the consolidation in the industry:
The aggressive Brazilians: Jorge Paulo Lemann, Carlos Alberto Sicupira, Marcel Herrmann Telles, Roberto Thompson Motta and Alex Behring - all founding partners of 3G Capital. The brains and moneyballs behind the ABInbev, Kraft Heinz and the recent Unilever bids.
The Sage of Omaha: Warren Buffet, one of the key players in funding the Heinz acquisition.
The JAB trio: Bart Becht, Peter Harf and Olivier Goudet. All FMCG industry veterans and the engine for the JAB Holding company.
The CEOs: Rakesh Kapoor (RB), Paul Polman (Unilever), Sir Martin Sorrell (WPP), Doug McMillon (Wal-Mart), Stefano Pessina (Walgreen Boots Alliance) and Jean-François van Boxmeer (Heineken). And soon Ulf Mark Schneider (Nestle).
If you have been following my central theme (i.e. consolidation on one side leads to consolidation in other parts of the value chain), then I predict the following:
My original article rom July 2013.
https://www.blogger.com/blogger.g?blogID=2121532005961592647#editor/target=post;postID=7153193287822144884;onPublishedMenu=template;onClosedMenu=template;postNum=26;src=postname
Welcome back to Omnikarma and Thank you for visiting my little blog page. Where the banter is usually around football, marketing, wine, leadership and music - usually in that order. It has been a while since I posted here - but most of my friends and colleagues know that I am super busy with the release of my first book - 'Building the Perfect Beast - What really happens in Brand Management'. (https://www.facebook.com/BTPerfectBeast/). More about this later - but today I wanted to provide my views and predictions on a topic that I first wrote about in 2013. i.e. the changing global dynamics in the FMCG industry and how further consolidation is playing out and expected to play out in the coming weeks and months.
In case you have been on a vacation to Mars and didn't have access to the media, here are some of the major developments in the FMCG M&A space since October 2015 (the last time I provided an update on this topic):
February 2016: Nestle SA agreed to buy out minority shareholders of Osem Investments Ltd., Israel’s largest publicly-traded foodmaker, for about 3.3 billion shekels ($844 million), returning to acquisitions in the industry after a series of divestments. Osem, which makes Cheerios breakfast cereal, hummus and a peanut-butter-flavored snack called Bamba, is Nestle’s biggest food acquisition since 2012, according to data compiled by Bloomberg.
March 2016: Keurig Green Mountain, Inc. and JAB Holding Company today announced the successful completion of the acquisition of Keurig Green Mountain by a JAB-led investor group.
August 2016: Wal-Mart Stores, Inc. and Jet.com, Inc. today announced they have entered into a definitive agreement for Walmart to acquire Jet for approximately $3 billion in cash, a portion of which will be paid over time. Additionally, $300 million of Walmart shares will be paid over time as part of the transaction. The acquisition will build on and complement the significant foundation already in place to serve customers across the Walmart app, site and stores and position the company for even faster e-commerce growth in the future by expanding customer reach and adding new capabilities.
October 2016: Coty Inc. announced today that it has completed the merger of The Procter & Gamble Company’s fine fragrance, color cosmetics, salon professional and hair color and certain styling businesses (“P&G Specialty Beauty Business”) into Coty. Coty is now the third-largest beauty company in the world, with approximately $9 billion in revenue. As a combined company, Coty will also hold the number one position in fragrances, and number two and three positions in salon hair and color cosmetics, respectively.
October 2016: Asahi Group has acquired Miller Brands UK, adding premium brands like Peroni Nastro Azzurro, Grolsch and Meantime to its portfolio of beers. The Japanese brewer’s investment in the new company and the acquisition of Miller Brands, which will become Asahi UK, is part of Asahi Europe’s strategy to lead the development of the continent’s super-premium beer sector, the company said.
November 2016: WPP announces that it has acquired, subject to regulatory approval, Promotion Execution Partners, LLC, a project management and procurement company that oversees shopper marketing promotions for clients, in the US. The acquisition continues WPP’s strategy of investing in high-priority segments, such as shopper marketing and e-commerce, and important markets, such as the US. According to the Association of National Advertisers, spending on shopper marketing is projected to grow to US$18.64 billion from 2016 to 2020, a 5.8% CAGR.
January 2017: Britain's biggest retailer announced that it was merging with Booker, the UK's top food wholesaler, in a £3.7bn deal. In a joint statement, the two companies said that the combined group would bring benefits for consumers, independent retailers, caterers, small businesses, suppliers, and colleagues, and deliver “significant value to shareholders”.
January 2017: Walgreens Boots Alliance, Inc. and Rite Aid Corporation today announced that they have entered into an amendment and extension of their previously announced definitive merger agreement under which Walgreens Boots Alliance will acquire all outstanding shares of Rite Aid, a U.S. retail pharmacy chain.
February 2017: Heineken N.V. announces today that it has entered into an agreement with Kirin Holdings Company, Limited to acquire Brasil Kirin Holding S.A., one of the largest beer and soft drinks producers in Brazil. The transaction will transform HEINEKEN's existing business across the country by extending its footprint, increasing scale and further strengthening its brand portfolio. On closing, HEINEKEN will become the second largest beer company in Brazil, with a stronger commercial platform from which to capture future profitable growth in an exciting beer market.
February 2017: Kraft Heinz announced on Friday a proposed $143 billion merger with Unilever in what would be one of the biggest deals ever (Note: the deal was subsequently dropped).
There are 5 common and recurrent themes across a number of these developments:
1. Margin improvement/Premiumisation
2. Need for Scale (in a world of falling demand) & Bargaining power in the industry
3. Key individuals, companies and families driving the consolidation
4. Emerging markets
5. E-commerce and digitalisation.
I think all points above are fairly self explanatory but Point 3 needs special mention. I call out the amazing fact that around 15 individuals are leading the consolidation in the industry:
The aggressive Brazilians: Jorge Paulo Lemann, Carlos Alberto Sicupira, Marcel Herrmann Telles, Roberto Thompson Motta and Alex Behring - all founding partners of 3G Capital. The brains and moneyballs behind the ABInbev, Kraft Heinz and the recent Unilever bids.
The Sage of Omaha: Warren Buffet, one of the key players in funding the Heinz acquisition.
The JAB trio: Bart Becht, Peter Harf and Olivier Goudet. All FMCG industry veterans and the engine for the JAB Holding company.
The CEOs: Rakesh Kapoor (RB), Paul Polman (Unilever), Sir Martin Sorrell (WPP), Doug McMillon (Wal-Mart), Stefano Pessina (Walgreen Boots Alliance) and Jean-François van Boxmeer (Heineken). And soon Ulf Mark Schneider (Nestle).
If you have been following my central theme (i.e. consolidation on one side leads to consolidation in other parts of the value chain), then I predict the following:
- Further consolidation in the media and advertising agency industries. Are we going to see the Publicis Omnicom merger back on the table ?
- Even further consolidation in industries like beer (Carlsberg next ?) & Personal care (watchout for Revlon, Rituals and Bull Dog),
- Disposals and subsequent mergers: Lower profitability segments like home care are ripe for this activity (are we going to see RB carve out its home care business into a separate business - maybe merge it with Colgate Palmolive or P&G jettisoning off its Laundry and Home care business).
- Mega retail merger: Tesco with Carrefour Or Wal-mart with Carrefour ?
My original article rom July 2013.
https://www.blogger.com/blogger.g?blogID=2121532005961592647#editor/target=post;postID=7153193287822144884;onPublishedMenu=template;onClosedMenu=template;postNum=26;src=postname
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