Why focus has become the new currency of value creation in consumer packaged goods

If you spend enough time in the boardrooms of consumer packaged goods (CPG) companies, you’ll notice that the conversation has changed.

A decade ago, strategy discussions centred on growth: new markets, broader diversification and bigger portfolios. Today, those same boards are asking different, more fundamental questions: “What should we own?” And more importantly, “What shouldn’t we own?”

This subtle shift reveals a massive transformation in where the global consumer sector is heading.

For decades, massive scale was regarded as the ultimate competitive advantage. Companies assembled sprawling portfolios spanning multiple categories, believing diversification would reduce earnings volatility and strengthen retailer relationships.

Today, investors are increasingly wary of businesses that are too diversified.

What was once celebrated as diversification is now penalised as dilution and unnecessary complexity. Portfolios that span categories with limited strategic overlap leave companies with fragmented equity stories, split management time, and a mosaic of reporting segments that few analysts fully understand.

The rise of the pure-play investor

Perhaps the biggest driver of this change has occurred within shareholder registers.

Institutional investors today have seamless access to virtually every listed market in the world. They can construct their own diversified portfolios across sectors and geographies with ease. If an investor wants exposure to both confectionery and pet food, they can simply buy specialist companies; they no longer need corporate management teams to diversify on their behalf.

The market is not subtle in its preference: it pays for focus, and discounts complexity. Category-leading, focused businesses consistently trade at higher multiples than diversified peers with comparable earnings. Shareholders can diversify their own portfolios, but they cannot outsource good capital allocation. Consequently, the value of a management team is now measured by the quality of their decisions about what to own, what to exit, and where to reinvest.

Case studies in corporate simplification

Viewed collectively, recent global corporate actions point towards a broader macroeconomic shift – The Great Simplification.

Consumer giants are sharpening their focus through a two-pronged approach: exiting non-core brands while doubling down on platforms where they possess a distinct competitive advantage.

• Kellanova & WK Kellogg: Kellogg’s decision to separate its mature North American cereals from its fast-growing global snacking business proved that distinct operations no longer need to coexist under one corporate structure. This act of simplification unlocked substantial shareholder value, culminating in Mars acquiring Kellanova at a significant premium to deepen its existing global snacking leadership.
• Unilever & ABF: Driven by sharpening shareholder scrutiny, Unilever recently completed the demerger of its ice cream business and combined its food division with McCormick & Company. This effectively positions Unilever as a pure-play home and personal care (HPC) business. Similarly, Associated British Foods (ABF) announced the demerger of its fashion retailer, Primark, to reposition ABF as a high-quality, pure-play food business.
• Nestlé & Kraft Heinz: Nestlé has systematically reshaped its portfolio over the last decade, exiting slower-growth brands to direct capital toward high-margin pillars like coffee and pet care. Even Kraft Heinz, created through one of the largest consolidation mergers in consumer history, continues to evaluate portfolio optimisation, proving that scale alone is no longer enough.

South Africa follows suit

Global themes have a habit of finding their way to South African boardrooms, and the local market is beginning the exact same journey.

Tiger Brands provides the clearest local case study.

In recent years, management has systematically restructured its portfolio by disposing of non-core assets. This has allowed the group to focus capital and resources squarely on categories where it holds dominant competitive positions, driving up returns on invested capital. Crucially, this strategy is not about becoming a smaller company; it is about becoming a better, more efficient one.

Similarly, Premier Group’s acquisition of Rhodes Food Group (RFG) highlights the secondary phase of M&A strategy.

While the transaction expands platform scale, it inevitably compels management to re-evaluate the newly merged portfolio. Transformational acquisitions naturally trigger critical questions about which businesses warrant incremental capital allocation and which assets have ultimately become non-core.

A new era for consumer M&A

If this trend continues, the next decade of consumer M&A will look fundamentally different from the last.

While the previous cycle was characterised by consolidation, the next will be defined by rigorous portfolio optimisation, corporate carve-outs and strategic divestitures.

For corporate advisors and investment bankers, this fundamentally changes the nature of strategic dialogue. Historically, conversations began with a simple question: “What should we buy?” Today, the question gaining real traction in the market is: “What should we sell?” Often, the answer to this second question delivers far greater long-term value to shareholders.

The Great Simplification does not mean downsizing.

It means becoming targeted, intentional and disciplined. For those advising on these vital boardroom decisions, this trend will undoubtedly define the M&A landscape of the coming decade.

Cara Pardini is a Corporate Finance Transactor, Brendan Grundlingh a Sponsor Client Director and Gareth Armstrong a Corporate Finance Executive |RMB

This article first appeared in DealMakers, SA’s quarterly M&A publication.

DealMakers is SA’s M&A publication.
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