Mergers and acquisitions in consumer goods up: study
The number of mergers and acquisition deals among the top 50 global consumer goods giants last year jumped 45 percent year on year to the highest in 15 years, a recent report by consultancy OC&C Strategy said.
There were more M&As because big FMCG companies responded to the challenges in driving growth as well as pressure from activist investors to increase margins.
The report also said that about 60 deals worth a total of US$145 billion were driven by reasons for market consolidation and investments for innovation and access to growth.
The combined revenue of the top 50 global FMCG companies grew 5.7 percent last year from just 0.5 percent in 2016. The annual revenue of the top 20 Chinese companies, however, rose 15 percent in the past year.
The study also showed that intense competition in most food and drink categories in China has crimped growth, and companies are avoiding to invest in R&D, product innovation and marketing in a bid to shore up margins.
In China, intense competition and lower margins are driving companies to internationalize to strengthen their domestic market capabilities and seek new growth through distribution in overseas markets.
Steven Kwok, associate partner at OC&C Strategy Consultants, suggested domestic players join their global counterparts to further expand their reach beyond the home market, continue to internationalize supply chains, products and markets via strategic acquisitions, and also recognize changes in demand from a new generation of consumers.