The consumer goods landscape in Europe is undergoing a seismic shift. Private labels are no longer just a low-cost alternative—they’re capturing significant market share by offering competitive quality and catering to value-conscious consumers. At the same time, shareholders are demanding higher returns and sharper focus, pushing corporates to reassess their portfolios. The result? A wave of portfolio streamlining, where corporates divest local or niche brands that don’t align with their core strategy. Interestingly, this creates a lucrative opportunity for private equity (PE) firms eager to pick up these assets.
- Sharpened Strategic Focus By offloading non-core brands, corporates can double down on their high-growth, scalable categories. For instance, focusing on flagship brands or high-margin segments like sauces or premium wellness products helps them stay competitive against private label encroachment.
- Improved Efficiency and Profitability Managing a diverse set of small brands is resource-intensive, from supply chains to marketing. Letting go of these brands simplifies operations and reduces complexity, freeing up resources to invest in innovation and digital transformation.
- Capital for Reinvestment Divestments generate liquidity that can be redirected toward higher ROI initiatives, such as expanding core brands, entering new markets, or acquiring disruptive startups in growth segments like plant-based foods or sustainable products.
- Enhanced Shareholder Value By focusing on fewer, better-performing brands, corporates can achieve stronger financial performance, aligning with shareholder expectations for improved returns and streamlined operations.
Benefits for Private Equity
- Established Market Presence Many divested brands come with built-in consumer loyalty and regional recognition—attributes that PE firms can leverage. These brands often thrive when given focused attention, free from the constraints of being “small fish” in a big corporate pond.
- Synergistic Growth PE firms can integrate these brands into their existing portfolio companies, unlocking synergies in production, distribution, and marketing. Consolidation in specific niches creates efficiencies and builds scale.
- Upside Potential in Niche Markets Under corporate ownership, smaller brands often lack the investment they need to grow. With refreshed branding, product innovation, or targeted marketing, PE firms can unlock hidden potential and capitalize on underserved or specialty markets.
- Attractive Exit Opportunities Once revitalized, these brands become prime candidates for strategic buyers—either other corporates seeking to re-enter the space or larger PE firms looking for proven performers.
A Dynamic Reshaping of the Market
As private labels continue to gain momentum, corporates are shedding baggage to streamline and focus, while private equity steps in to nurture and grow the brands left behind. This dynamic benefits both parties: corporates achieve efficiency and profitability, while PE creates value by building niche champions.
Ultimately, this trend is reshaping Europe’s consumer goods landscape. For corporates, it’s about staying competitive in a high-pressure environment. For PE firms, it’s a chance to turn overlooked assets into valuable, market-leading players.
Want to learn more about M&A opportunities in the food and beverage industry? Please contact us at www.foodstrategy.co.uk
