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Consumer goods companies are using M&A as a strategy to expand
global reach, enter new markets and consolidate the focus on their core
brands. Acquisitions are also used to vertically integrate and optimize
supply chain operations. Acquisitions in the sector are also meant for
securing critical resources or proprietary technologies in certain product
categories. In the context of post-economic crisis, companies in the
food, drink, consumer goods and retail sectors are actively involved in
M&A
Consumer goods companies are using M&A as a strategy to expand
global reach, enter new markets and consolidate the focus on their core
brands. Acquisitions are also used to vertically integrate and optimize
supply chain operations. Acquisitions in the sector are also meant for
securing critical resources or proprietary technologies in certain product
categories. In the context of post-economic crisis, companies in the
food, drink, consumer goods and retail sectors are actively involved in
M&A
Consumer goods companies are using M&A as a strategy to expand
global reach, enter new markets and consolidate the focus on their core
brands. Acquisitions are also used to vertically integrate and optimize
supply chain operations. Acquisitions in the sector are also meant for
securing critical resources or proprietary technologies in certain product
categories. In the context of post-economic crisis, companies in the
food, drink, consumer goods and retail sectors are actively involved in
M&A
Consumer goods companies are using M&A as a strategy to expand
global reach, enter new markets and consolidate the focus on their core brands. Acquisitions are also used to vertically integrate and optimize supply chain operations. Acquisitions in the sector are also meant for securing critical resources or proprietary technologies in certain prod- uct categories. In the context of post-economic crisis, companies in the food, drink, consumer goods and retail sectors are actively involved in M&A activity, especially in developing nations. Pepsi and Nestlé have made nine and seven acquisitions respectively in developing nations during the period 2006–2010. In developing markets like India, China and Russia, M&A deals are driven by the consolidation of smaller companies. After the implementation of the NAFTA and GATT agreements, many companies in the food and beverages industry have focused on M&A. These mergers have been for enhancing the advantage of existing dis- tribution systems or underutilized plant capacity. During the period 2005–2007, approximately 125 mergers and acquisitions took place in the snack food industry. Post-2008, the sector witnessed increased M&A activity on account of the need to access a broader customer base, leverage economies of scale and create stronger brand awareness. The availability of private equity capital and corporate cash along with the loosening of lending stand- ards are emerging as catalysts for M&A activity. In 2010, the top ten food and beverages companies collectively held $30.1 billion in cash balances which was an increase of 15 percent compared to 2006.
According to the E&Y Consumer Report 2010, M&A in the global
consumer goods industry stood at $101.6 billion in 2010 compared to $45.7 billion in 2009. In one of the largest deals, in 2010, KKR/Vestar Capital Group and Centerview Group acquired Del Monte Foods for $53 billion. In 2008, the consumer services industry announced 774 M&A deals. In 2009, the number of deals fell to 582, while in 2010, the number of announced deals was 786. In 2011, Kraft acquired UK confectioner Cadbury for $19.6 billion. In 2010, both Coca-Cola and PepsiCo. acquired significant portions of their bottling operations in order to reduce their structural costs and enhance the facilities for the testing, launching and scaling of new prod- ucts. The Coca-Cola Company paid $12.3 billion for Coca-Cola enter- prises, while PepsiCo. paid $14.8 billion to acquire Pepsi Bottling Group and Pepsi Americas. In another large deal Kraft acquired Cadbury for $19.6 billion to gain access to new geographic markets and capitalize on synergies associated with complementary product portfolios. The deal
Table 10.1 Major M&As in the consumer goods industry
Acquirer Target Amount in billions
2006 Procter & Gamble Gillette $57
2008 InBev Anheuser Busch $52 1989 KKR RJR Nabisco $25 2007 Groupe Danone Royal Numico £12.3 2000 Unilever Bestfoods $20.3 2010 Kraft Foods Cadbury $19.6 1988 Philip Morris Kraft $12.9 2008 Heineken Scottish & Newcastle $15.3 (S&N) 2006 Cerberus Albertson $17.4 2005 Goal Acquisitions Allied Domecq $14.4 2010 Coca-Cola Coca-Cola Enterprises $12.2 2008 Altria UST Inc. $10.4 2000 Diageo Pernod Ricard Seagram Spirits and $8.15 Wines 2009 PepsiCo Inc. Pepsi Bottling Group, $7.8 Pepsi Americas 2008 Pernod Ricard Vin & Spirit (V&S) £5.7 2007 Kraft Foods Groupe Danone $7.6 2007 Nestlé Gerber (Novartis) $5.5 2007 Coca-Cola Energy Brands $4.10 2002 SAB Miller $3.48 2005 SAB Miller Coors $3.4 2008 Smucker’s Folgers (Kraft Foods) $2.95