While many consumer companies have built significant scale through acquisitions, buyers are more focused on true integration versus aggregation. More expensive capital requires buyers to generate more value from their investment, so they’re focused on how businesses are leveraging their scale and best practices in areas like sales, marketing, procurement, and service delivery to drive consistency, efficiency, and success across the organization.
2023 Outlook - January 12, 2023
From essential home services to brands that help consumers identify with a lifestyle to healthier eating trends, the consumer industry provides a wide range of vibrant sectors to create long-term value. Here, senior professionals from the Harris Williams Consumer Group discuss the trends, sectors, and buyer dynamics to watch in the coming months.
Which consumer industry trends are creating the most notable M&A opportunities in 2023?
Perhaps the most important trend to note is the remarkable resilience of the consumer in recent months. Despite headwinds from inflation, interest rates, and broader economic uncertainty, consumers have seen wages rise and their personal balance sheets remain fairly healthy. That has enabled spending to remain strong across many segments of the consumer market. In fact, U.S. non-automotive retail sales were higher during the 2022 holiday season than they were in 2021.*
Consumer Multi-Site
Closely related is strong and steady consumer demand for multisite healthcare and related services. The dynamics driving healthcare—aging populations, increasing access to care, and growing interest in better health and wellness—are creating a new set of opportunities for investors with proven strategies for customer acquisition, brand management, site selection, digital transformation, and other disciplines that set the best consumer-facing businesses apart.
Consumer Services
Consumers have continued their longer-term trend of increasingly outsourcing home repair and renovation, yard and tree care, and other tasks around the home. Tasks that were once thought of as discretionary outsourcing are now part of the consumer’s lifestyle. This resilient demand and growing desire to outsource have increased investor appetite for businesses across a wide range of consumer services.
Food & Beverage
Consumers continue to refine their food choices to incorporate healthier eating habits across a broader set of cuisines. They are also looking for fast, ready-made meal options that fit into their hectic day-to-day schedules, a long-term shift accelerated by the pandemic. Although restaurants have reopened, these behavior changes have stuck, with demand remaining at elevated levels, especially for better-for-you and international options.
Consumer Products
Following pandemic restrictions, consumers have also rekindled their appetites for experiences and education, supporting a sustained recovery in the travel and leisure sector and in childhood enrichment. Little luxuries and daily indulgences also tend to enjoy steady consumer demand, a trend our team sees in the health and beauty space. Our latest survey confirms that consumers who prioritize health and beauty products plan to continue spending even during a downturn.
Consumer Multi-Site
Closely related is strong and steady consumer demand for multisite healthcare and related services. The dynamics driving healthcare—aging populations, increasing access to care, and growing interest in better health and wellness—are creating a new set of opportunities for investors with proven strategies for customer acquisition, brand management, site selection, digital transformation, and other disciplines that set the best consumer-facing businesses apart.
Consumer Services
Consumers have continued their longer-term trend of increasingly outsourcing home repair and renovation, yard and tree care, and other tasks around the home. Tasks that were once thought of as discretionary outsourcing are now part of the consumer’s lifestyle. This resilient demand and growing desire to outsource have increased investor appetite for businesses across a wide range of consumer services.
How are buyer and seller dynamics shifting in consumer sectors?
Despite economic pressures in the market, buyers and investors continue to have a healthy appetite for high-quality consumer companies that have proven the resiliency of their business models. Those companies that have established themselves as leaders in their markets and have consistently generated strong growth and cash flows remain as attractive as ever. Relatedly, buyers are staying closer to their comfort zones and investing in sectors and businesses where they know they can make an impact on the company’s future growth. Buyers have also continued to invest in their existing businesses and have been very active with add-on acquisitions.
Buyers are staying closer to their comfort zones and investing in sectors and businesses where they know they can make an impact on the company’s future growth.
*Source: MasterCard SpendingPulse, 12/26/2022