Consumer Goods businesses live or die by their brands. M&A activity to optimise brand portfolios therefore plays a key but sometimes overlooked role in the industry.
In this article, we explore what is driving the acquisitions and divestments in the FMCG sector, the challenges and opportunities that this flurry of activity presents, and the duty of the Chief Financial Officer and the Chief People Officer to ensure that M&A activity is successful.
Although M&A activity in 2024 underperformed market expectations, we at The MBS Group are encouraged by recent transactions and believe that the Consumer Goods sector is poised to undergo and capitalise upon a major wave of investments and divestments in 2025. Rising interest rates and geopolitical uncertainty have inhibited recent dealmaking, with average private equity holds increasing to over eight years – which is twice their pre-Global Financial Crisis average – and global uncommitted capital reaching over $2tn. Promisingly, shifts in corporate strategy, easing rates, and regulatory changes following the ‘Year of Democracy’, have caused a recent surge in M&A and are set to drive further activity in the year ahead.
“Whilst breaking up isn’t easy, it is sometimes for the best.”
A major reason for the acquisitions we are observing is that corporations are responding to accelerating changes in consumer preferences by pivoting their portfolios. For instance, the challenges faced by the alcoholic beverages category in developed markets have encouraged brewers to take sips – and sometimes gulps – of their soft drinks counterparts.
Notably, in January, Molson Coors acquired 8.5% of Fever-Tree for £71m, in exchange for a strategic partnership guaranteeing exclusive commercialisation rights in the USA. In the same month, Carlsberg completed the £3.3bn acquisition and integration of Britvic, cementing its position as PepsiCo’s largest bottler in Europe. These expansions of their non-alcoholic portfolios will help the beer behemoths to unlock further growth by targeting a broader range of consumption occasions, and we anticipate that their competitors may follow suit with similar investments.
2024 saw national elections in five of the world’s top ten economies, and 2025 has already yielded a transfer of power in Germany, with Canada preparing for an election later this month. Ensuing regulatory shifts may further expedite M&A activity. Trump’s appointment of Andrew Ferguson as the new Chair of the Federal Trade Commission has ushered in a more laissez-faire approach to scrutinising transactions. Whilst his predecessor, Lina Khan, took an anti-trust angle on the proposed acquisition of Kellanova by Mars for $36bn, citing concerns about the creation of an oligopoly, Ferguson has publicly declared his desire to create a more ‘business friendly’ M&A environment.
It takes two to tango, and in order to buy, there must be a willing seller. Several FMCG corporations are undergoing significant restructuring, leading to the disposal of brands that are perceived as ‘non-core’ due to their low growth prospects or limited synergies.
Unilever’s new CEO Fernando Fernandez, described ice cream as a ‘clear outlier’ compared to the rest of the portfolio, and is aiming to fully spin off the division by the end of this year. Indeed, Unilever is pivoting away from food and beverages and towards beauty and personal care at an increasing rate, with the recent sale of The Vegetarian Butcher contrasting against the acquisition of Wild for a rumoured £230m. Similarly, as of January, Reckitt now reports in three segments – Reckitt, Essential Home, and Mead Johnson – indicating an appetite for separation.
Reckitt’s ambition to maximise the potential of its Consumer Healthcare portfolio is reflected by growing investor interest in the OTC category. Stada, currently backed by Bain Capital and Cinven, is set to IPO in September, and British Femtech company Elvie has just been acquired by California-headquartered Willow. GSK, J&J, and Sanofi all saw their Consumer Healthcare entities as ‘non-core’, leading to the recent creations of Haleon, Kenvue, and Opella. The pure focus of these entities on the OTC market now represents an exciting opportunity for their brands to benefit from the strategic attention and best in class FMCG leadership that they deserve. Indeed, this emerging community of OTC executives are already demonstrating the benefits of separation and specialisation, blending Consumer Goods brand building capabilities with Healthcare product expertise. Whilst breaking up isn’t easy, it is sometimes for the best.
CFOs play a crucial role in M&A activity, from the identification of potential targets through to due diligence, and valuation. Having the right leadership in the finance function is therefore important in ensuring that businesses can exploit the investment and divestment opportunities available. Some might argue that an archetypal American CFO with an investment banking background is better placed than others to take advantage of such opportunities, but we are sure that many CFOs reading this column would think otherwise! A CFO with a strong grip of fundamentals also has the ability to spot a bargain, particularly in an undervalued category.
CPOs also have a key role in determining the success or failure of investments and divestments. Post-merger cultural integration is critically important to ensure that anticipated synergies can be achieved, but conversely, CPOs may choose to preserve independent working cultures, so that the DNA of acquired brands isn’t lost. Coca-Cola runs the Costa Coffee, Innocent Drinks, and Monster Energy brands at arm’s length, enabling the retention of what made those brands successful, whilst leveraging its scale and global reach. Spin offs require the creation and careful curation of new corporate cultures, and the leadership changes that typically follow a transaction necessitate a focus on culture to maintain morale and coherence. CPOs are also responsible for adapting the skillsets of their businesses as required, with private equity acquisitions typically bringing greater emphasis on value creation, whereas IPOs demand a more diligent approach to governance.
“CPOs may choose to preserve independent working cultures, so that the DNA of acquired brands isn’t lost.”
The tariffs unleashed by the Trump administration this week naturally create many challenges for our sectors, and the emanating policy uncertainty will deter some M&A activity. Nevertheless, the impact of tariffs on trade and growth could drive further easing of rates, funnelling capital towards private equity and facilitating cheaper credit to finance acquisitions, thus encouraging dealmaking.
We need no persuading of the strong investment case for FMCG businesses, and remain sanguine about the M&A outlook for Consumer Goods. We look forward to advising our clients undergoing these critical junctures over the coming months, and welcome your thoughts on this important topic.
