Consumer markets M&A 2024 outlook for Switzerland and beyond

In 2024, consumer companies are focusing on creating value by selling non-core assets to streamline operations, reduce costs, and reinvest in their core businesses. Examples include Johnson & Johnson’s spin-off of Kenvue and Sanofi’s planned separation of its consumer health business. Acquisitions are aimed at enhancing technology, sustainability, and supply chain security, such as The Schwarz Group’s investment in AI firm Aleph Alpha, to improve customer experience and operational efficiency.

With the increase in capital costs, businesses are scrutinising their balance sheets. We expect to see ongoing efforts to decrease debt by divesting capital-heavy assets such as real estate. For instance, in December 2023, Decathlon transferred ownership of around 90 of its European store locations to the American investment firm Realty Income.

We expect to witness an increase in distressed situations in consumer markets. This follows developments such as Next’s acquisition of the insolvent Cath Kidston and Joules brands. Elevated interest rates could lead to more insolvencies, particularly in retail and hospitality. However, without further economic setbacks, we don’t expect this activity to exceed the levels of 2023, which saw a significant number of bankruptcies faced by retailers such as Wilko in the UK and Bed Bath and Beyond in the US. 

In 2024, the grocery retail sector is expected to continue to consolidate due to challenging market conditions and high consumer prices. Recent examples include the proposed merger between Albertsons and Kroger in the US, Aldi’s acquisition of Winn-Dixie and Harveys, and Carrefour’s purchase of Cora and Match stores in France. In addition, Casino’s plans to sell supermarkets as part of its debt restructuring demonstrate the momentum of this trend. Companies are also investing in consumer-focused capabilities, such as Walmart’s expansion into advertising and logistics. This trend of consolidation and capability acquisition is likely to continue, along with portfolio reviews leading to selective divestments.

Food and beverage companies will be active in M&A, driven by strategic portfolio reviews and the need to manage prices as input costs stabilise. This environment favours financially strong companies and creates opportunities for consolidation, brand acquisitions, and selective disposals. The attractiveness of the sector to investors is underlined by a decade-long increase in European VC investment, particularly in innovative and sustainable subsectors. Despite financing challenges, private equity remains interested in the food sector, as evidenced by Paine Schwartz Partners’ move to take Costa private. Global megatrends such as climate change and technological advances are shaping investment themes, with companies focusing on sustainability, access to resources, and digital access to consumers, as seen in PepsiCo’s investment in Instacart.

The consumer health sector is expected to grow, following major companies such as Johnson & Johnson, GSK, and Pfizer, which spun off their consumer health businesses. In 2023, Sanofi announced plans to separate its consumer health division, and Bayer is considering a similar move. This trend is leading to increased M&A activity as companies like Viatris and Haleon reshape their portfolios. The growing demand for consumer health products is being driven by demographic shifts, health awareness, and the rising cost of living, which is leading consumers to opt for over-the-counter medicines and supplements. In addition, the rise of online healthcare services is spurring deals in the online pharmacy sector, such as Medbase acquiring the Swiss business of Zur Rose Group.

Regulators and consumers keep increasing the pressure on packaging players to provide solutions for plastic removal and recyclability. This impacts company valuations, especially for those without clear eco-friendly strategies. As a result, we expect M&A activity to pick up pace in 2024, driven by selective disposals, consolidation, and public-to-private deals – and an increased focus on companies with sustainable packaging expertise. Key examples include Smurfit Kappa’s merger with WestRock and One Rock Capital’s purchase of Constantia Flexibles. Larger firms are targeting smaller innovators in sustainable packaging, leading to higher valuations for these specialised businesses.

We expect more fashion transactions to take place in 2024, as consumer discretionary spending is likely to remain subdued, and the fashion market will be increasingly polarised between winners and losers. Luxury global powerhouses such as LVMH and Kering are expected to continue to apply their ‘house of brands’ strategies, illustrated by Kering’s investment in Valentino. Platform plays are also expected to occur. For example, Next, a UK retailer with an online presence in more than 70 countries, has been acquiring or picking up stakes in smaller retailers in recent years as it expands its ‘Total Platform’ business.

Pet spending is expected to be resilient, mainly driven by premiumisation and rising pet ownership in emerging markets. Growth in consumer services will boost the pet sector. Corporates and PE firms are eyeing M&A to expand their offerings and reach, with a focus on high-quality small to midsize targets, like General Atlantic and L Catterton’s investment in Butternut Box. Popular PE strategies include bolt-on acquisitions and platform plays, as seen in Cinven’s investment in Arcaplanet.

In 2024, the number of hospitality and leisure businesses coming to market is expected to increase, driven by a resurgence in tourism, a shift in consumer spending towards experiences, and resilient spending in the sector. Europe is expected to attract investment from several global regions. The market will see more private equity divestments and public-to-private deals, such as Apollo’s acquisition of The Restaurant Group, in response to the sector’s recovery from the pandemic. The sports sector, maintaining its 2023 momentum, will continue to attract M&A interest due to the relative scarcity and high value of sports broadcasting rights and franchises.