Before Covid-19 hit the world, profit margins in the global FMCG industry grew by 18.7 per cent, nudging 2007’s 18.9 per cent record.
The data, from the latest, 18th edition of the OC&C Global 50 FMCG brands report, showed the industry in comparatively strong shape with “years of remodelling helping to deliver improved growth and margins,” according to the report.
It concluded that most of the Global 50 entered this year with relatively strong balance sheets, giving them the firepower to ride through any short-term hits in performance driven by the Covid-19 pandemic.
“Nevertheless, the ongoing pandemic has shaped many of the emerging themes within the sector, accelerating the long-term shift towards online channels, with online grocery penetration to undergo a 35+ per cent year on year in the first half of this year.”
In China, the FMCG market was particularly strong last year.
“The F&B market in China has shown impressive growth with two companies recording a significant improvement in this year’s Global 50 rankings on the back of robust organic growth in China,” said Leo Chiang, a partner at OC&C Strategy Consultants.
“The continued expansion of the Chinese middle class, continued investments into new product innovations within the sector and aggressive partnerships with emerging business models to engage new customers have all played a crucial role in the rise of these Chinese companies,” he said.
“Despite this, the Covid-19 pandemic has fundamentally transformed the dynamics in this sector and accelerated longer-term trends in the FMCG market. Continued investments in digital capabilities and understanding consumers’ evolving needs and purchasing behaviour will become increasingly necessary for companies to thrive in this post-Covid world.”
M&A activity declines
Meanwhile, there were moderate levels of mergers and acquisitions as companies continued to streamline portfolios and acquire growth businesses alongside selective consolidation. The number of deals fell by 13 per cent to 48 and the value of the deals was down 40 per cent to $US45 billion, the lowest level since 2011.
OC&C said the key acquisitions trends included expansion into higher growth natural/healthy product segments, as well as selective vertical integration to strengthen market capabilities.
“In Asia, there were a number of sector-specific deal dynamics in Asia, with Japanese brewers continuing to invest the profits of a lucrative home market to strengthen market capabilities within the beer business with Asahi’s acquisition of CUB and Fullers, as well as product diversification to capture new growth engines such as Kirin’s acquisition of cosmetic brands and a producer of specialised acid ingredients.”
Chinese dairy giants are deepening their regional market capabilities with Mengnui acquiring Bellamy’s and Lion Dairy in Australia and Yili acquiring Westland Co-Operative in New Zealand.
The Top 50 Global FMCG company order remained relatively unchanged from 2018, with only five companies experiencing significant changes in their rankings, including liquor giant Kweichow Moutai, which advanced by six places. The company achieved revenue growth of 16.2 per cent last year, driven by price uplift, portfolio optimisation, and channel-mix improvement.
Three new entrants joined the list last year: Brazil’s Marfrig, Canada’s Saputo and America’s Conagra, underpinned by new product launch and aggressive acquisition strategy, while Imperial Brands, Hormel Foods and Tingyi (Master Kong) dropped out.
OC&C and The Grocer’s Global 50 Top 10 2019
Procter & Gamble
British American Tobacco