United States

Q3 2018 Consumer Products Industry Spotlight

INSIGHT ARTICLE  | 

Spotlight

Food traceability supported by blockchain has an immense and pervasive impact within the food and beverages space. Consumers want transparency, and they want to know from where the products and ingredients are coming. Food traceability gives integrity and confidence to the process, including how the product was packaged and distributed to its final destination. It also provides transparency and cost savings when it comes to food safety. Blockchain technology allows manufacturers, distributors and retailers to know exactly where each product lands in the event of a recall. In years past, Walmart needed six days to reliably trace the origin of recalled products. Today’s blockchain process reduces that search to six seconds. Supply chain costs are also reduced, as companies are now able to optimize efficiencies throughout the process. Sourcing, packaging, distribution and transportation costs are all affected in a positive way.

Big picture

Consumer-facing businesses face a number of challenges in today’s market. While strategics continue to pursue ways to expand their offerings, consumer companies are becoming more cognizant of how recent trade policies may affect them going forward. The potential impacts of a global trade war have come into focus over the past few months—many companies felt a reason to believe that recent tariff policies would not pose a substantial risk to them. Heading into the final quarter of the year, many consumer products (CP) businesses are feeling more pressure, in many cases due directly to larger trade policies. Those pressures are beginning to influence earnings, and many RSM clients are requesting more due diligence as a result. Strategics and private equity investors alike are showing signs of hesitation, and active dealmakers are trying to better understand how they might avoid those tariffs going forward. If they can’t avoid them, they are looking for ways to more effectively pass those costs on to consumers.

Looking ahead

The consumer industry continues to adapt to changing technology and evolving consumer behavior. Today’s labor market is tight, and many CP companies are looking to technology to help reduce labor costs while focusing on management retention. Strong management remains a priority across the industry, and demand for quality management is pushing companies to offer managers more benefits and more flexibility. Elsewhere, strategics and investors alike are actively looking for ways to expand their product lines, particularly with respect to healthy products. Should the public markets see a significant sell-off near-term, we may see an uptick in private investments. However, if interest rates continue to rise as expected, private equity deals will inevitably become more expensive. With capital to spend and heightened competition across the board, finding the right platform will continue to be a priority.

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