Innovation is the lifeblood of consumer staples
Innovation is frequently cited as being the lifeblood of consumer staples. Indeed, many of the
consumer staple majors were founded by great innovators: Henri Nestle; William Lever; Will
Kellogg; Milton Hershey; and Henri-Louis Pernod to name but a few. So where are we today?
However, the majors have lost their innovation prowess
As the industry giants have pursued scale, they have lost sight of a consumer which now favours
personalisation and authenticity. Individualism and experimentation are not to be encouraged
within the majors when ZBB, simplification and immediate earnings growth are seemingly the path
to share price riches. As barriers to entry have declined, smaller brands are filling the void.
Hence innovation needs to be bought in
In the above context, we believe that the majors will increasingly look towards inorganic investment
to acquire innovation which they can then look to scale. Dollar Shave Club, Seventh Generation,
Annies, It Cosmetics, Monkey 47, Camden Town are but a few recent examples.
The ability to acquire the right innovation and scale it is becoming increasingly important
We believe that the industry is effectively starting to move towards a model more akin to biotech /
mainstream pharma. Arguably this is not new, but we see the pace accelerating.
Where will it all end? We get an outside view
Keeping the above in mind, we thought it worth exploring the view from outside the mainstream
and within the M&A ‘hotspot’. We have worked with the pre-eminent US consumer investment
marketplace, CircleUp, to get their perspective. Where is the US industry headed? What are the
key factors in determining innovation success? What would they do if running a staples’ major?
Answers within.