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Sustainability has become essential to the long-term prosperity of global companies and is seen as a key pillar of business growth. The C&R sector is no exception. Businesses everywhere are actively integrating sustainability into their business strategies. Well-informed Millennial and Gen Z consumers continue to voice and demonstrate strong preferences for green, ethically produced products as well as products that promote health and wellness, while regulatory and social pressures concerning the environmental impact of businesses are also increasing. As the 2019 Retail and Sustainability Survey report by CGS revealed, '68 percent of respondents consider sustainability important to them when making a purchase and 47 percent would pay more for sustainable products.'

Businesses today are looking to acquire assets that reflect and cater to consumers' strong environmental and ethical values and comply with increased regulation. Most of these targets are likely to be strategic deal opportunities that offer longer-term value. Consumers are voicing their preferences and businesses are responding.

Nicola Longfield, Global DA C&R Lead

Sector players are actively responding to what consumers are telling them and reviewing their portfolios by re-deploying capital into more-sustainable products. Consumer products giant Unilever, for example, announced in mid-2019 that its 'purpose-led, Sustainable Living Brands are growing 69 percent faster than the rest of the business and delivering 75 percent of the company's growth.'

Businesses are also carefully reviewing their supply chains to ensure alignment with today's environmental and health trends. Food and Beverage (F&B) company Danone has committed to making 100 percent of its packaging recyclable, reusable or compostable by 2025.

Carlsberg is also developing sustainable packaging via so-called paper bottle technology. The company is committed to zero carbon emissions at its breweries and a 30-percent reduction in its full value-chain carbon footprint by 2030.

Consumers are driving the companies to change ethically - find ways to bring sustainability right from sourcing, processing, packaging, distribution and even in marketing while reaching out to their consumers. Hence, while doing M&A, this is a must-have ingredient in targets for long-term success.

Barema Bocoum, Partner - C&R, KPMG in France

The sustainability agenda is also exerting significant influence on the Fashion and Luxury sectors. Informed consumers are increasingly evaluating the environmental and ethical values of the brands they choose and global fashion giants are responding by actively looking for sustainable brand acquisitions. In 2019, for example, LVMH acquired a stake in ethical fashion brand Stella McCartney. Meanwhile, Macy's and JCPenney have partnered with ThredUp to capitalize on the second-hand fashion trend.

We expect the sustainability trend to continue driving or influencing a significant level of global M&A activity this year with companies factoring sustainability criteria into their investment decisions to enhance value in the longer term.


Consumer & Retail M&A trends 2020: Pursuing opportunities amid uncertainty
KPMG’s 2020 Consumer & Retail M&A trends report predicts that the transformation journey will continue this year as global businesses proactively respond to evolving consumer behaviors – reinventing their business models to become more customer-centric. The focus on portfolio rationalization, consolidation and diversification is expected to continue driving the majority of sector-related M&A activity in the year ahead. In addition, we expect sector players to remain heavily influenced by the ongoing sustainability agenda, as investors target assets with sustainability features offering value in the longer run. The report also outlines our regional outlook and what to expect as key M&A themes in the sector this year.
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