M&A drives sustainable FMCG progress

Nestlé, Coca Cola, P&G and other consumer firms are now in a race to adapt to rapidly changing consumer trends, including a rise in veganism and concern over plastic packaging, but some are more fleet of foot than others.

Fast Moving Consumers from environmental non-profit and investment research provider CDP ranks 16 of the largest and publicly listed food and beverage and household and personal care companies on business readiness for a low carbon transition.

With 90 per cent of the FMCG sector’s carbon emissions in the value chain, companies are exposed to raw material risks and product consumption risks. The proximity of the sector to consumers means companies are exposed to changes in consumer preferences, but also have the opportunity to drive behavioural change in order to ensure the longevity of their brands.

Some of the most transformative low carbon innovations delivered by these companies include developing vegan and organic product ranges, and the analysis shows that five of the seven food and drinks companies surveyed that originally offered dairy or meat-based products are innovating with new vegan alternatives.

Similarly, household and personal care companies are creating more plant-based, natural options – here six out of seven companies including L’Oréal are actively innovating to replace petrochemicals with natural, biodegradable ingredients and Unilever is among four companies to have developed vegan personal care product ranges.

In terms of packaging, approximately 60 per cent of companies are now investing in biodegradable plastic and recycling infrastructure, with Danone leading the way.

So the news is generally good for the planet, but almost 60 per cent of the top 10 revenue generating brands for each company have failed to deliver low carbon innovations in the last 10 years. Indeed many FMCGs are responding by acquiring smaller, sustainable brands, with 75 per cent of companies have directed M&A efforts towards the acquisition of niche, environmental brands in the last five years and this type of activity has more than quadrupled over that time.

Full report here.

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