Consumer products M&A update: Q4 2017
With a lack of millennial brand loyalty impacting retailers, many consumer products companies are turning to digital technologies and in-house venture capital funds to drive innovation and differentiate themselves. This Consumer Products M&A update provides Deloitte Corporate Finance LLC insights and market data analysis that shed light on M&A trends in the Consumer Products industry.
Consumer products trends
- Lack of millennial brand loyalty1: With millennials now comprising one-third of the total adult population, and possessing substantial purchasing power, their lack of brand loyalty is having a major impact on retailers. Millennials, having grown-up in the information age, are constantly searching for the best product for the best value, regardless of brand. Fifty-one percent of millennials do not have a preference between private-label and national brands. Sixty-two percent say value is their number one reason for trying a new brand.
- Digitization drives differentiation2: The growth of digital technologies has effectively put all companies in the technology business. Consumer product (CP) companies have joined the movement in 2016 marking the first year that digital took hold in grocery, influencing 51 percent of consumers’ grocery purchases. Today, 80 percent of shoppers have used a digital device to browse or research grocery products, driven by technological improvements that allow customers to find exclusive promotions through apps.
- Venture capital incubators3: Many CP companies have invested in their own venture capital funds to incubate start-up companies and support entrepreneurs. For example, Coca-Cola’s Venturing & Emerging Brands (VEB) was developed for brand incubation and industry forecasting, focusing on beverages that fulfill unmet consumer needs. The group has already seen success in brands such as FUZE. Other companies that have invested in their own venture capital incubators include General Mills, Hain Celestial, Kellogg’s, and Danone.
- Blockchain applications4: Blockchain is a distributed database that holds records of digital data or events in a way that makes them tamper-resistant. True applications of blockchain technology have grown immensely, and as the technology continues to improve, its applications will be invaluable for CP manufacturers. According to a Deloitte CP and manufacturing study, 42 percent of executives surveyed planned an investment of $5 million or more into blockchain technology.
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1 “Fortnightly Thoughts: Whose brand is it anyway?” Goldman Sachs. August 18, 2017.
2 “2018 Consumer Products Industry Outlook,” Deloitte. December 31, 2017.
3 “2018 Consumer Products Industry Outlook,” Deloitte. December 31, 2017.
4 “2018 Consumer Products Industry Outlook,” Deloitte. December 31, 2017.