Largest FMCG companies of the globe enjoy moderate growth

22 July 2019 6 min. read
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Growth at the world’s 50 largest fast-moving consumer goods firms has slowed over the last year, dropping from 5.7% to 3.2%. Despite this, the solid year of organic growth shows that the market has seen a strong comeback since the financial crisis, boosting profitability between the firms to its highest in 17 years as a result.

Large fast-moving consumer goods (FMCG) companies have seen their revenue growth and operating profit growth hampered significantly in the past years. The sector faces a number of headwinds, as the ecommerce boom continues to eat into the profits of traditional retailers across the global market and currencies fluctuate dramatically while geopolitical instability threatens to hit imports and exports with tariffs. As a result, while the consumer goods segment can expect global demand to rise, key developing markets have undergone periods of slower-than-expected growth.

At the same time, while markets become increasingly volatile amid changing consumer habits and heightened digital competition, the revenue of top 50 FMCG companies has continued to grow, regardless. According to the latest report into the sector from OC&C Strategy Consultants, in the last year top FMCG firms grew at a steady 3.2%. While this represents a moderate decline from the 5.7% of 2017 – when the FMCG market reached its highest level since 2011 – it is still head and shoulders above the 0.5% seen in 2016.

As a result of this, the profitability of the top global 50 FMCGs reached 18.2% in 2018, the highest level since annual Global 50 report by OC&C Strategy Consultants began in 2002. Identifying which markets host the best atmosphere for sustained FMCG growth, and which companies warrant emulation, is an essential task for FMCG firms as they look to build on their remarkable comeback in the decade following the financial crisis.

The top 20 FMCG companies of the globe

Leading firms

Of the world’s largest FMCG companies, Nestlé still sits top of the pile, by some distance. After sales plateaued in 2017, the company’s $93.4 billion grocery sales returned to growth last year, at a rate of 2.1%. Similarly, in second spot, Procter & Gamble saw noticeable revenue growth in the past year, sitting at $66.4 billion, ahead of Pepsico, which grew by 1.8% from 2017’s $63.5 billion haul. The two Benelux firms of the top five had the hardest 2018 – although they still retained their stature in the ranking. Unilever, which saw a simplification of its leadership structure by combining its previously split British/Dutch headquarters shelved by a shareholder rebellion, remains fourth with $60.1 billion in revenues, while AB InBev sales saw shrinkage of -3.2%.

British American Tobacco, buoyed by its massive acquisition of Reynolds, rose up the list to push fellow American multinational cigarette and tobacco manufacturing company Philip Morris out of the top ten. British American Tobacco had growth of 25.2% to hit grocery sales of $31.7 billion.

Beyond the top ten, there was also little change. A strong year of growth saw Heineken’s holdings group rise several places, with 4% expansion taking its grocery sales to $26.4 billion – and beyond that of Kraft Heinz and Mondelez – who both saw more muted growth. Meanwhile the only new member of the top 20 was Japan Tobacco – buoyed by a strong year for tobacco and cigarette producers in general, at an expansion rate of 3.3% to hit grocery sales of $18.7 billion.

OC&C identified two phenomena driving profit levels: ‘premiumisation’ and efficient management of operating costs. There has been a continued and increasing consumer demand for all things luxury. Coffee is an excellent example of this. Instant coffees have been usurped by the single origin espresso from the coffee machine. This has allowed producers to charge a significant premium for capsules and drive up profits.

The US hosts the largest number of top 50 FMCG firms

M&A slowdown

The FMCG sector saw 60 deals, worth $145 billion in 2017, with a continued emphasis on emerging markets meaning 37% of acquisitions occurred in such economies. M&A activity subsequently accounted for around 15% of growth in the FMCG sector in 2017, thanks to many firms now looking to acquisitions as a key to diluting risk as well as boosting financial performance in the short term, as markets become increasingly volatile amid changing consumer habits and heightened digital competition.

However, this trend does not seem to have had the same prominence in 2018. According to the researchers, the volume of deals fell from 2017’s record high of 60 to 55 in the FMCG sector, while value plummeted by 48% to $70 billion. This was largely attributed to an absence of megadeals, such as AB InBev’s move for SABMiller.

Will Hayllar, Managing Partner at OC&C Strategy Consultants in the UK, commented, “Despite the lack of blockbuster acquisitions in 2018, it was a very strong year for the Global 50 as prior M&A activity began to bear fruit. In the years before, the Global 50 were snapping up companies that cater to new and fast-growing consumer trends, such as the shift towards wellness, and consumers' seemingly never-ending love affair with coffee. These acquisitions are beginning to pay off, resulting in a return to organic volume growth and record profit margins.” 

In terms of geography, the US hosts more of the top 50 than any other country, at 17 – though this is one fewer than in 2017. The UK meanwhile saw its number increase by 1. At the same time, Brazil, which has been dogged by economic and political uncertainties since the election of far-right President Jair Bolsonaro, saw both its members of the top 50 lose their positions in the rankings in 2018.