As consumer tastes shift, CPG giants move to refine product mix
Two of the biggest consumer packaged goods-makers unveiled separate deals to acquire small companies catering to consumers’ increasing taste for natural and environmentally friendly products.
Unilever said it acquired organic herbal tea business Pukka Herbs Ltd., while Nestlé announced the purchase of Sweet Earth, a plant-based food company that offers products based on tofu, seitan and other plant matter.
The $760 Billion US CPG Industry Looking for Traction
The purchases are the latest in a raft of acquisitions in the CPG sector, where shifting consumer preferences have put enormous pressure on the industry’s traditional giants.
As previously reported by eMarketer Retail, US unit sales of CPG items dipped 0.4% in the year that ended February 19, following a flat annual average growth rate between 2013 and 2016, according to a study of actual purchases from a panel of 110 million US households by market research firm IRI. Sales rose slightly by 0.5% to nearly $760 billion, compared with an annual average increase of 1.8% in the three years through 2016, according to the IRI data.
CPG giants have responded by cutting costs, redesigning products, and acquiring startups and higher-growth labels. Procter & Gamble, for instance, has cut its portfolio of about 170 brands to around 65 labels, which include Tide detergent, Pampers diapers, Gillette shaving products and the high-end SK-II skincare line.
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The Wall Street Journal, in reporting the pair of deals on Thursday, noted that Nestlé and Unilever have come under takeover pressure this year amidst the consumer shift, with Unilever fighting off an unsolicited bid from The Kraft Heinz Company and Nestlé dealing with an activist investor lobbying for change.
In its latest quarterly update on merger and acquisition activity, PricewaterhouseCoopers (PwC) noted the industrywide pressure to cater to new consumer tastes. “Evolving consumer preferences toward products featuring key buzzwords like ‘healthy,’ ‘organic,’ ‘all-natural,’ ‘higher quality,’ [and] ‘better for the environment,'” are likely to be key factors driving takeover activity in the second half of 2017, it said.
