Big brand owners are under pressure never seen before. Retailers, faced with the growing presence of discounters and the value-conscious shoppers, are increasingly looking to introduce own-brand products where margins are more sustainable and attractive. Equally, new, innovative, start-up brands that appeal to the less loyal, digital consumer are entering the market.
This has coincided with a pretty stagnant market for sales of major consumer brands, and big brand owners have been rattled into taking action. The most grandiose manifestation of this is the blockbuster merger of Heinz and Kraft. While it is no surprise Heinz owner 3G was looking to do a big deal, the sheer scale of the merger and the impact it will have has caught some people out. And 3G will have already identified the brands, assets and territories that do not suit its long-term focus.
“3G will have identified brands that do not suit its long-term focus”
Since the recession there has been a lot of portfolio reshuffling. Hence, we’ve seen Unilever buy assets from Sara Lee to allow focus on its personal care business while disposing of Findus, Peperami and Ragu; Mars acquire assets from P&G to continue to focus on petcare; Nestlé’s disposal of food brands and ice cream businesses; and P&G outline its intent to sell its beauty brands. We have also seen Reckitt Benckiser and GSK actively divest non-core brands.
We expect to see further activity as brand owners seek to focus on their core categories and recognise the need to drive scale in order to cut costs. Unilever and Mondelez are likely to drive activity in spreads and soft cheese, and the recently announced sale of Iglo Group, including the Birds Eye brand, potentially indicates there will be further consolidation in frozen food.
However, is this limited to branded players? The potential sale of Bakkavor - a major supplier of own-brand products - suggests activity may not be confined to the big brands. This is all against a backdrop of the grocery retailers themselves looking to streamline the breadth of their SKUs. We’re in for an interesting time ahead, with brand owners and own-brand manufacturers increasingly looking for deals that make the most sense for their more focused operations.
Liz Claydon is UK head of consumer markets at KPMG
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