•  Carlos Lopez 

    Consumer Products – Sector focus

     
    Author: Carlos Lopez, Relationship Director
    Publication date: 01.08.2010

     

    The household and personal care (HPC) sector remains closely tied to general macroeconomic conditions, and the recovery to pre-crisis levels is expected to be gradual. Sales growth for multinationals averaged 6.5% during the boom years; in 2009, flat levels, at best, were reported. These have improved in the year to date. Retailer dominance continues to offset any price increase initiatives by the HPC sector, and the recent stabilisation of commodity prices is providing comfort. Shelf space management, price/product mix relationship, with emphasis on the latter, and acute focus on cash conversion remain the key strategic drivers.

     
    Upturn triggers renewed interest in acquisitions 

     
    Improving macroeconomic conditions in developed economies, as well as compelling sales in emerging markets, offers a brighter picture for the industry. Consistent cash flow generation and the resurgence of availability of credit are prompting market leaders to get back on the acquisition trail with a number of multi-billion-dollar deals announced in the first half of 2010. Private equity involvement is also increasing, primarily in the US, which in turn will put upward pressure on valuation multiples in the medium term, albeit far from the levels seen at the height of the boom.

     
    It remains clear that the private-label industry emerged the winner from the recession, as consumer spending patterns and perception towards private-label goods changed. On average, own-label goods are 22% cheaper than leading brands, with competing quality; as a result, 33% of buyers in Europe are intending to buy more private label versus 4% for branded goods. Trading down seems to have subsided, but we are far from trading up. The ability of private-label companies to offer value and premium goods to customers is key to maintaining the healthy market shares that were attracted during the recession. A further push towards private label categorisation is the next logical step therefore. Western Europe continues to pioneer the private-label market.

      

    Supporting M&A activity 

    As mentioned earlier, consolidation is expected to continue, and with M&A-led financings requiring significant bank involvement, I will continue to support our customers in achieving these strategic milestones, acting as their preferred conduit to the capital markets and preferred risk management solutions provider.

     

    Source: This article was first published in Lloyds Banking Group - Perspective Magazine Edition 2.


     

2/21/2018 1:18:46 AM