In 2020, large players undertook strategic reviews and disposed of assets that were not core to the business or a poor portfolio fit, for example: Kraft Heinz’s Cheese business, Coty’s Professional and Retail Hair business and Imperial Brands’ premium cigar business. We expect to see several such announcements in the new year, with players either adding value in their portfolios or de-leveraging balance sheets for profitability.
This is not limited to product categories, as players are also exiting geographies where they do not have a strategic intent to grow, in turn redeploying capital in markets considered strategic in the long term. For instance, in 2020, Walmart sold its operations in Argentina (to domestic retailer Grupo de Narváez), in Japan (Seiyu to KKR and Rakuten for US$1 billion), and in the UK (grocery business ASDA’s majority stake to Issa Brothers for US$8.8 billion). At the same time, Walmart continued to increase its exposure in India through a stake purchase in Flipkart worth US$1.2 billion.
Assets coming out of such strategic reviews are expected to lead to mega deals in 2021. Private Equity (PE) firms with ample ‘dry powder’ to invest and increase exposure in the sector (US$1.5 trillion in unspent capital was reported at the start of 2020) are well positioned to be preferred buyers.
Include agility, the advantages of a strong-and-short supply chain and direct customer engagement.
Use of digital channels has accelerated rapidly and is expected to continue, expanding fintech in 2021.
FMCGs seem determined to strengthen their D2C channels and exert more control over their digital presence.
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