Report: Key to M&A success is consumer, shopper approach
Merger and acquisition activity among the Top 50 CPG companies marked a 15-year high in 2017.
Product innovation in the consumer packaged goods industry has become increasingly more challenging due to the ever-changing needs and wants of consumers, the impact of e-commerce on product assortment and pricing and the success of smaller companies, which has leveled the playing field in the industry. Most of the new product success has been driven by smaller companies that can rapidly develop new and unique products to meet specific consumer and shopper needs. This has resulted in many of the larger consumer packaged goods (CPG) companies looking for innovation through mergers and acquisitions to accelerate their own innovation pipelines and capture some of this growth.
In fact, merger and acquisition (M&A) activity among the Top 50 CPG companies marked a 15-year high in 2017 — a 45% increase compared to the previous year, according to IRI, Chicago. That’s why making informed and strategic M&A decisions is critical.
The latest IRI Point of View, “Bigger Can Be Better: Maximize Speed and Impact With Benefits-Based M&A,” examines how CPG companies can increase the chance of M&A success by shifting away from strategies based on traditionally defined categories to a benefits-based approach through a consumer and shopper lens. By taking an unbiased, strategic approach to examining how, where and why shoppers look across categories, departments and aisles to solve for their needs and wants, CPG companies can quickly and accurately:
- Establish initial marketplace boundaries.
- Understand and size up the shopper-defined marketplace.
- Pinpoint incremental long-term growth opportunities and build a fact-based business proposition.
“Today’s M&A strategy is no longer about increasing efficiency and cutting costs, but is instead used as a tool for getting the right product on the shelf quickly in order to meet consumer demand and create high-potential growth opportunities,” says Thomas Juetten, executive of product innovation. “In order to create those growth opportunities, CPGs need to keep an eye on consumer and business trends, but really hone in on the benefits that are driving shopper loyalty, such as natural, organic and authentic.”
“The market has indelibly changed, and consumers are unquestionably steering market evolution,” says Robert Tomei, president of market and shopper intelligence. “To win, CPG companies absolutely must adopt a shopper lens to M&A evaluation. By shifting from a category or type focus to a benefits-based approach, CPGs will see market opportunity more clearly. Then they can shift their strategies accordingly.”