London sees most retail brand arrivals of all European cities

06 June 2017 Consultancy.uk

London was the most sought after city for retail investment in Europe last year, with 65 new brands opening, while Paris, the number two, was a distant second for Europe at 36. The success of London was partly attributed to the influx of tourists and the low pound, which pushed up interest from investors. Hong Kong took the number one spot with 87 new retain brands entering the market.

New analysis from CBRE, a real estate consulting firm, finds that the city of London is the second most sought after destination for the retail industry looking to expand their global operation. The city saw 65 new retailers open stores in the city last year – more than any of its European counterparts. The majority of the new premises were obtained by US-based chains and brands, while the total investment into the city by the retail industry hit a record £2 billion last year.

The city benefits from a range of factors, including its brand, an influx of tourists leveraging the lower pound, although competition too has picked up among retailers vying to secure the most prestigious spots and their key target demographics. In terms of type, 25% have been Mid-Range retailers, while certain areas, such as Mayfair, attracted the largest number of with luxury retailers and making up 20% of all new retail entrants. However despite benefiting from this continued popularity, London has also been a high-profile victim of gentrification and commercialism over the past few decades, in no small part thanks to the continued desirability of the city as a financial hub.

Top target markets by new entrants

Hong Kong meanwhile, took the number one spot last year attracting 87 new brands last year, with London relatively far behind. Dubai came third (59), while Doha (58) and Tokyo (48) rounded off the top five. Singapore sixth (46), and Paris came seventh (36), although a distance behind London as the second European destination of choice for retail investment. Moscow (33) and Toronto (30) were eighth and ninth respectively – with no US city featuring in the top 17. Vienna completed the top ten with 29 new resident brands.

In the total rankings, European cities remain the preferred destination for global retailers at 43% of total new investments, up from 36% last year. This is in part due to the expansion of brands within the region across the wider market. Across the globe, coffee shops and restaurants saw the most new international expansions, at 22% of total expansions, specialist clothing stores (18%) followed, while mid-range fashion stores (17%) came third.

Commenting on the results of the study, Hugh Radford, Chairman of London Retail at CBRE said, “London is faring very well compared to other global cities and despite the heads winds of the business rates revaluation, which has had an impact on most retailers, international retail brands still continue to see the importance of having a store presence in London. The record number of tourists visiting London, benefitting from the weak pound, has also given a boost to most retailers’ sales figures. However, retailers are being increasingly selective about getting the right location and property to allow them to develop their retail offer and attract new customers.

David Close, Senior Director for Cross Border Retail, added, “The current economic climate has led to retail brands targeting tried-and-tested retail locations. Retailers are increasingly looking at the traditional strongholds of London, Paris and Hong Kong and stores in the most prominent cities remain a strategic opportunity to attract consumers, build brand loyalty and generate sales off-line and on.”

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Consumer goods start-ups grow interest from venture capital

23 April 2019 Consultancy.uk

Funding the latest consumer goods start-up has been a real money-spinner for venture capitalist firms, with a number of $1 billion companies – or unicorns – having emerged in the space in recent years. New analysis has explored the resulting corporate consumer products activity in the acquisitions space.

Consumer products have enjoyed years of strong growth as new markets opened in developing Asia. China in particular has enjoyed strong growth across a range of consumer good types as the country’s middle class expanded. Private equity firms have been keen to pick up targets in the space as they expand their portfolios to include additional local capacity as well as customers in new markets.

As a result, a study from Bain & Company has found that interest from PE firms in the consumer product space grew sharply in 2018, hitting 6.1% of all invested capital for the year, and making it the third most sought-after category. It is now only behind financial services (23.9%) and advanced manufacturing and services (13.9%).

Corporate venture capital investment

The ‘M&A in Disruption: 2018 in Review’ research found that growth in the segment reflects key changes in the segment as a whole. This is particularly true of insurgent brands, which often leverage local expertise in order to take on international giants in domestic markets.

Short change

The market changes have led to shifts in motivations for consumer goods company investments from PE firms. The number of strategic investments stood at 50% in 2015 compared to deals that increased scope. This has shifted significantly, with 34% of deals focused on strategic outcomes in 2018 compared to 66% for scope. The move towards scope reflects companies seeking out fast-growing products that enable stronger revenue growth streams.

Acceleration in scope-oriented M&A in consumer products

However, there were other motivations for deal activity in the space. Activist investors have put pressure on companies to expand their portfolios in recent years, with the trend expanding from just US targets to Europe.

Further trends

The other key shift in the space regards outbound deal activity. The study found that outbound deal activity has increased significantly in the Americas (up 363%) with total deal volume up only slightly (15%). Key deals included Coca-Cola and Costa, Procter & Gamble and Merck’s consumer health unit, and PepsiCo and SodaStream. In the Asia-Pacific region, outbound deal activity rose 195% while total deal activity fell sharply, by -36%. The EMEA region saw both a sharp decline in outbound deal activity, at -68%, as well as lower overall deal activity, which fell by 32%.

Cross-regional deal making

Deal-making in the current environment is increasingly fraught with uncertainties, as business models change on the back of new technologies, new consumer sentiments and wider market changes from new entrants. As such, acquisitions are increasingly useful as possible hedges on changes in market direction. As such, companies are increasingly pressed to take a future-back position, making sure to incorporate a vision of how the company needs to look in five years into acquisition strategy.

The firm notes that certain acquisitions which enhance a remembrance of a nobler mission, revive a sense of entrepreneurialism and engage directly with consumers may be necessary qualities in acquisitions that transform a company to fit market expectations in the coming decade. While going forward, focus on innovation, partnering with retail winners, reducing cost base and constantly reallocating scare resources will be necessary to protect market share in areas where insurgent local and strategic competitors are active.

Related: Private equity asset growth top priority for 2018.