Blog: Food sector consolidation a drop in the ocean
Katy Askew | 19 July 2013
We all know that the food sector is highly fragmented. It is a phrase thrown around all the time. And, as a publication that attempts to cover the major developments in this crowded industry, just-food writers can attest to this fact first hand.
But I was quite surprised by some research that crossed my desk this morning (19 July). According to Bernstein, the top 12 largest food and soft-drink companies account for just 18.3% of global sales.
Let me put this in context: Unilever accounts for a greater proportion of global home care sales (with an 18.9% share of the market) than all the major food companies combined. As the largest food company, Nestle holds a comparatively piddly 4.3% share, followed by PepsiCo with 2.9% of the market. The 12 biggest purveyors of household products account for over 60% of global sales and the 12 largest personal care and beauty companies account for more than 50% of total sales.
Compared to other FMCG sectors, why is the food industry so fragmented?
There are relatively low barriers to entry and historically a plethora of different firms have operated in the arena, meaning that while a degree of specialist skill is required these skills are comparatively accessible. The taste preferences of consumers is likely to play a role too. There is no need for global standardisation. In fact, it is a disadvantage, because tastes differ so widely from region-to-region or even person-to-person. There is also a really strong need for trust - and familiar local firms are often most trusted by consumers.
Are we likely to see consolidation step up? It is possible. We have, for example, seen a spate of M&A in the organic baby food sector as larger firms from Campbell Soup Co. to Danone have snapped up challenger brands. But frankly, this activity is but a drop in the ocean. Certainly, I doubt that we will see a player with a comparable market share to Unilever in household care emerge in the food sector any time soon.
Danone completed its US$12.5bn acquisition of WhiteWave Foods this week. The move will roughly double Danone's presence in North America, where WhiteWave is a top four dairy player. ...
Premier Foods plc revealed today (28 March) it has secured a deal with its pension scheme trustees that will see the UK food maker reduce its pension burden....
Hain Celestial, under the scrutiny of the investment community in recent months and facing some challenges in its domestic market, has announced another shuffling of its management pack....
FrieslandCampina, which today served up higher profits but lower sales for 2016, is ready to offload the last non-dairy business owned by the Dutch cooperative giant....
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