Stiff competition and high valuations may be putting off some consumer products companies. More than three-quarters of consumer executives expect increasing competition for assets, particularly from private equity. One-third say their company failed to complete or canceled a deal in the past 12 months because of a disagreement on valuation.
Of those considering an acquisition, slightly more than half (51%) say they will be looking at bolt-ons to increase market share. Only 14% are considering a transformative deal — another reflection of the uncertainty gripping consumer executives.
One more sign of the cautious approach by consumer products companies is the trend toward divestment rather than acquisition. Identifying underperforming assets for divestiture currently is among the top three strategic activities for consumer respondents, highlighting the preference to chase lost margins through retrenchment rather than growth.
Now is the time for consumer products companies to leverage M&A. Transformative deals offer consumer products companies the potential to become disruptors as opposed to being disrupted, pushing beyond their traditional boundaries and engaging new customers in ways they never before had considered.
3. Understand your future consumer and what’s important to them
Consumer behavior and preferences globally have changed in ways that were unimaginable last year. In the wake of these shifts, only one in five (21%) consumer executives believes their company has overperformed during the pandemic relative to their competitors.
As companies prepare for the future consumer, the short-term shifts they are seeing may be here to stay. In response, more than half (52%) of consumer products respondents say that they have increased their strategic focus and investment on customer engagement.