Report sees divestiture of smaller brands on way

By Published on .

Consolidation pressures in the household products, personal care and cosmetics industries are increasing. That, in turn, should lead to a wave of merger and acquisition activity, as well as more divestitures of smaller brands, concludes a report released last week by Banc of America Securities.

Consolidation of major retail customers combined with inconsistent sales and earnings growth from once steady players such as Procter & Gamble Co. and Gillette Co. add to the consolidation pressure. So does the fact that most of the major players have globalized to the extent that they no longer can expect double-digit sales growth from expansion overseas, the report contends.

While most analysts have dismissed the potential for household products companies to combine with food companies, along the lines of Unilever, Banc of America said it sees potential for more such combinations in the future.

Food and household product companies both increasingly deal with the same retail customers, particularly as Wal-Mart Stores expands in food categories. Food companies, however, aren't as global as household products players, the report said, creating an opportunity for consolidation as retailers consolidate globally.

"Conceptually, we find the combination of Procter & Gamble and Campbell Soup particularly attractive," the report said, adding Banc of America "would not be surprised to see Sara Lee acquire a middle-tier household product company."

In this article:
Most Popular