Consumer goods M&A up by $170bn
Amid worldwide market uncertainty and unprecedented political upheaval, it’s reassuring to know that there is some good news in the world of mergers and acquisitions. We take a look at how FMCG M&A over the last year has brought strength to the market.
The top 50 FMCG companies in the world had a combined income of $1,177bn in 2014, with the number one-ranked company, Nestlé, earning $100.2 in sales alone. Despite challenges such as uncertainty around consumer spending, declining brand loyalty, an increase in scrutiny from regulatory authorities and, in some cases, a failure to effectively innovate, the largest five FMCG companies, Nestlé, Procter & Gamble, PepsiCo, Unilever and JBS, saw sales growth of around 3.4 per cent last year.
The value of mergers and acquisitions among the top 50 companies rose by $170bn to $226bn – a figure greater than the previous four years in total. The sector is now pushing forward with mergers and acquisitions to drive revenue growth. The overall value of acquisitions within the FMCG sector increased fourfold during 2015, making it the largest year in M&A since 2008.
AB InBev acquires SABMiller for $108bn
May of this year saw the EU’s approval of Anheuser-Busch InBev’s acquisition of SABMiller in one of the largest brewery takeovers in recent years, with the intent of becoming the world’s largest brewer with around 30 per cent of the market globally. The deal, which is expected to be completed in August, is currently undergoing scrutiny from antitrust regulators in many different countries including China, the USA and South Africa. As a concession to the regulators, AB InBev will dispose of almost all of SABMiller’s European assets, such as premium brands Grolsch and Peroni – a buyer for these, Asahi Group Holdings Ltd, has been identified and an offer of around $2.9bn is on the table.
Heinz Kraft Merger – $42bn
In March last year, investment firms Berkshire Hathaway and 3G Capital collaborated to merge together two of the largest and best-known food brands in the world, Heinz and Kraft. In a deal worth $42bn, the fifth-largest global, and the third-largest US food company was created. Heinz is best known for its baked beans and tomato ketchup, and Kraft for its Maxwell House coffee and Philadelphia cheese. It is anticipated that the new food giant will undertake cost savings of at least $1.5bn by the end of 2017 which, it says, will enable it to deliver shareholder value. Heinz Kraft is estimated to be worth around $109bn, with eight of their combined brands worth over £1bn, and five worth between £500m and $1bn.
Following a successful year for M&A in the sector, the appetite for FMCG M&A shows no sign of diminishing as larger companies face increasing competition from smaller, local businesses which have adapted to digital and direct selling models more effectively. The behemoths’ priorities must now be to investigate evolving business models, focus innovation on service, and consider M&A which takes into account the changing tastes of customers to enhance their brands.
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