2013 FMCG Global 50 Companies

July 15, 2013 | REPORT

FMCG Global 50 Companies Hit a BRIC Wall, but Africa could be the Engine for Growth



  • Growth in developed markets remains hard to come by in a depressed economic climate
  • Increased competition from leading local players in BRIC markets is taking a slice of growth from established global companies
  • 29 out of 50 companies in the Global 50 have established a serious presence in Africa, thanks to its high growth potential




Summary
The top-50 Global FMCG companies have shown resilience in a tough macro-economic environment, but their growth rate has been in steady decline, with top-line growth down from 7.3% in 2011 to 5.6% in 2012 and organic growth down from 6.7% to 4.9%.

Although Asia and Africa have been the biggest growth territories, the Global 50 have started to hit a BRIC wall in terms of growth potential:

  • Market share is low across all the BRICs (approximately 27%) – and in China it’s even lower, at 17%
  • In the BRICs, the Global 50 have been outpaced by local leaders both in terms of organic growth and total growth including M&A.
BRIC-based players are mounting a challenge to the established Western Global 50, climbing up the rankings and broadening their geographical reach through international M&A:
  • Grupo Bimbo, the Mexican food and drinks company, acquired Sarah Lee’s food business in the US – moving up in the rankings from 40th to 31st place
  • JBS, the Brazilian food processing company, has shot up in the rankings from 15th to 7th place
  • Smithfields, a US meat business and the world’s largest pork producer, has been bought by a Chinese firm, Shuanghai Holdings, giving the Chinese company control of a competitive meat supply
To speed up growth and win market share, the Global 50 need to be more aggressive in their organic and M&A growth strategies or risk losing out to local leaders in the long-run.

Africa as a potential growth engine for FMCG companies
Unlike the BRICs, where the Global 50 have struggled to find growth, Africa has increasingly come to the fore as an engine for growth. This is thanks to a rapidly increasing population, high-pace GDP growth as well as a rapidly growing middle class and improving infrastructure.

What’s more, compared to the BRICs, Africa remains a relatively un-competed market by local players, which are still finding their feet.

Already 29 out the 50 biggest FMCG players have set up a presence in Africa, a testament to its potential to drive growth - with Nigeria, Kenya, Ghana and Angola the most popular countries. European companies are beating their US counterparts in terms of finding success in Africa, with Diageo, Nestlé and Unilever as prime examples of companies enjoying strong market share in the continent.

Although companies that entered Africa early are the ones enjoying success, there are still potential opportunities – but companies need to move fast, as succeeding in Africa requires building a position in the early stages of category development. There are opportunities to acquire local players on a country-by-country basis and integrate them to accelerate development of a scale business in Africa.

Winners & Losers in the OC&C FMCG Global 50 rankings

Winners
Esteé Lauder: delivering impressive organic growth of 10% (the highest of the global 50) and also growing in Europe – showing that if you get the proposition right then you can still persuade European consumers to part with their money

Unilever: continued to drive strong organic growth of 6.9%, ahead of close competitors Nestle and P&G (the fifth year running they’ve delivered stronger organic growth than P&G)

JBS: delivered continued rapid growth, breaking into the top-10 of the Global 50 as they build a truly global meat empire

Pernod Ricard: another strong organic growth performance, ahead of major competitor Diageo, and reflecting the success Pernod has had in thriving Asian markets

Grupo Bimbo: another Latin American player emerging as a truly global player, climbing up the Global 50 on the back of the acquisition of Sara Lee’s bakery business giving them significant presence in the US

Losers
Avon: bottom of the growth table with zero organic growth and facing a strategic rethink after Coty walked away from their takeover bid last year

P&G: struggling to find growth and seeing margins fall in 2012, investors lost faith in Bob McDonald and are hoping AG Laffley can restore some shine

Kimberley Clark: also struggling to find growth and accepted they can’t compete in the nappy market, signalling Huggies exit from the mainstream nappy sector

Imperial Tobacco: struggling to find growth in an increasingly hostile regulatory environment (as all tobacco players are) but with much lower margins than peers, reflecting a weaker brand portfolio and write downs associated with acquisitions in better times

Meiji Holdings: Japanese food conglomerate has seen declining sales and very weak margins – suffering from high exposure to a weak domestic market

-ENDS-

Methodology
Full details of the methodology can be found on pages 47 – 51 of the full report.