Consumer Products and Services

Big Consumer struggling to manufacture growth

21 Feb 2014

The industry’s annual U.S. confab is chock-a-block with whiz-bang products like Bluetooth-enabled toothbrushes and funnel-cake corn dogs. But it’s just empty calories if it doesn’t lead to robust top lines. Cost-cutting alone can’t justify today’s expensive share-price multiples.

Nestle’s new taste for risk is welcome

13 Feb 2014

Pressure is building on the world’s biggest food company. Nestle is well-run and financially strong. But annual results show sustaining growth is hard, especially in developed markets. Buying L’Oreal out of a skincare JV shows Nestle is willing to go on the offensive.

Lenovo’s turnaround trick will be harder this time

13 Feb 2014

Buying IBM’s PC unit launched the Chinese group onto the global stage. Absorbing Motorola poses a similar challenge with a smaller upside: the U.S. handset maker is no longer a brand leader. Cost savings and scale should help reduce losses, but Lenovo’s timeline is ambitious.

Nestle selldown leaves L’Oreal more a family group

11 Feb 2014

The food giant is selling an 8 pct stake in L’Oreal back to the French cosmetics company. Nestle says its residual 23 pct holding remains strategic after the 6 bln euro deal. But the Bettencourt family will tighten its control. Long term that makes Nestle more of a seller.

China’s "biggests" come early, late or not at all

7 Feb 2014

Recent superlatives include top red wine consumer, car purchaser and oil importer. Being the biggest brings China investment, but can also be a sign of inequality and inefficiency. Meanwhile, some coveted firsts still look a long way off.

Sony jumps onto Japan’s taboo-breaking wagon

6 Feb 2014

The troubled Japanese giant is finally getting serious about restructuring. It’s selling its ailing PC business to a local buyout fund and is separating out its loss-making TV unit. The moves are a welcome sign that Sony is willing to shrink in its bid to return to health.

Men’s Wearhouse gets caught with its pants down

29 Jan 2014

The U.S. suit peddler rejected Jos. A. Bank’s approach partly because of “significant antitrust concerns.” Now, competition authorities are digging deeper into the table-turning offer made by Men’s Wearhouse. It’s an ominous sign for a deal that once looked tailor-made.

Unilever washes off emerging-market uncertainties

21 Jan 2014

Currencies and slowing growth are working against the consumer staples giant. But forex aside, the trends in developing economies remain firmly positive. For Unilever, the declines in developed markets’ revenues and profits are more worrying.

U.S. employers can handle a minimum wage rise

14 Jan 2014

Even for companies like Macy’s and Safeway with lots of low-paid workers, a rise in the federal baseline to $10 per hour would need only tiny changes to pricing or margins, a Breakingviews analysis shows. Modest cuts in bosses’ pay can also help offset higher wages at the bottom.

Sears’ downward spiral starting to look terminal

13 Jan 2014

Poor holiday sales were the latest blow to Eddie Lampert’s flailing retailer. Widening losses mean Sears may have to keep selling assets and cutting inventory to fund a turnaround. If that chases even more customers away, it’s questionable whether Sears has a future at all.

U.S. consumer stocks set for growth shakeout

7 Jan 2014

With investors chasing dividend yield, companies like Procter & Gamble and Colgate have sported high and similar valuation multiples. Now that the economy is gaining steam, the focus may swing back to growth – or the lack of it. Some in the sector could face a bumpy ride.

Starbucks can stomach Kraft $2.8 bln coffee jolt

13 Nov 2013

Howard Schultz’s coffee chain is paying dearly for breaking off a grocery alliance with the Cheez Whiz juggernaut and losing an arbitration case. Though a fat number, for Starbucks the penalty pales next to the benefits of bringing a fast-growing, high-margin business in-house.

Avon can’t dress up ugly foreign bribery case

31 Oct 2013

A rift with the SEC over corruption charges coupled with poor results erased over $2 bln of the cosmetic giant’s market value. Balking at a government offer isn’t unusual, but doing so in public breaks new ground. Avon and others may be fed up with the regulatory zeal on FCPA.

Time for Reckitt to quit prescription drugs

22 Oct 2013

The household goods group is wondering what to do with its heroin substitute. A full disposal would be the best outcome. Sales are sliding, generic competition is mounting, and the business sits oddly with the rest of Reckitt. Still, the parent will be lucky to get 2 bln stg.

Nestle lacks a good reason to sell L’Oreal

2 Oct 2013

The Swiss foods company may put its 23 bln euro stake in the French cosmetics group up for sale. If Nestle offloads, it is likely to use the money to fund a share buyback. What’s lacking is clear rationale for the KitKat company to make the break.

Unilever’s emerging weakness is a strategic hazard

1 Oct 2013

The Anglo-Dutch consumer products outfit is suffering from slower growth in the developing world. Brazil and India are tricky and currency swings are hurting too. Unilever has to be wary of complacency. But its broad plan, to run hard at faster-growing markets, remains right.

Apple appeal may bring smartphone patent ceasefire

9 Aug 2013

After Obama’s veto of a U.S. trade agency ruling, courts look like patent warriors’ last chance to stifle rival products. Even that option may vanish if Apple loses its bid to block Samsung’s devices from the U.S. market. Peace – and real competition – may finally get a chance.

Grohe should help rid Germany of locust curse

12 Jul 2013

The private equity-owned bathroom fixtures maker is mulling an IPO. Possible buyers are circling. Grohe was declared a victim of “locust investors” by a German politician a decade ago. Today it is stronger than ever, even though its mooted valuation looks a bit optimistic.

Home Depot out-flips and strips private equity

19 Jun 2013

A Carlyle-led group bought the retailer’s wholesale arm for $8.5 bln just before the real estate bubble burst. The firms should recoup on paper their HD Supply investment in the IPO. Home Depot fared better. With the proceeds, it bought back shares – which have since doubled.

Danone gets China dairy deal, but not the cream

20 May 2013

The French group scrapped talks with milk producer Mengniu five years ago - just in time to avoid 2008’s melamine scandal. Since then, Mengniu has changed its supply chain and become state-owned. Danone’s new $417 million investment looks safer, but the terms look tougher.