Consumer Products and Retail Quarterly Update
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Consumer products and retail quarterly update Q1 2020 Deloitte Corporate Finance LLC | www.investmentbanking.deloitte.com Consumer products and retail trends In this update Consumer trends E-commerce takes over1 Apparel dresses down2 • • Economic outlook While many businesses are doing their best With the country forced into work from to market products online, it has been the home setups and solely videoconference • Industry analysis 100 percent web-based businesses and interactions, consumers are dressing up less • Select M&A transactions brands that have truly seen their demand and prioritizing comfort. Luxury apparel • Appendix skyrocket. In North America, the number of companies are doing their best to adapt, but online orders for web-only retailers were up are seeing the effects of the virus on items 52 percent YoY in the last two weeks of that would not show up in a traditional This update will focus on news march. Outpacing the success of general e- teleworking call, such as pants and shoes. and trends in the following areas: commerce, US online grocery websites are Casual clothing companies are seeing seeing a 300 percent increase in web traffic additional demand for their products, YoY, resulting in valuable exposure for including leisure and athleisure brands that • Food and beverages e-commerce grocery businesses, as is the now transcend the typical boundary of office • Products and durables case in other industries traditionally and home wardrobe. associated with brick-and-mortar operations. • Restaurant and food services • Specialty retail Home improvement3 Health and wellness4 People spending 24/7 at home has led to a The COVID-19 pandemic has resulted in a Who we are boom in “fixer-upper” activity, as renewed cautiousness about health, homeowners now have limited outlets to prompting consumers to incorporate healthy Deloitte Corporate Finance LLC is occupy their attention besides their tendencies to many areas of their lifestyles. a leading global middle market immediate surroundings. Atypical “essential” From food and beverage choices to wellness retailers, such as Lowe’s and Home Depot, supplements, more consumers are taking M&A advisor. Our professionals are becoming increasingly important as care of their bodies to help fight infection have extensive knowledge of and demand for smaller home décor products and stay healthy during this period of time. transaction experience in the skyrockets. Home improvement retailers While sanitation products and medical have also seen a boost for outdoor furniture supplies held the initial clamor of consumers’ consumer products and retail and equipment, as consumers look to shopping carts, many consumers are taking space. maximize and invest in their limited available on long-term changes as they look toward outdoors space. maintaining health post-pandemic. Contacts Lorin DeMordaunt Managing Director In the news [email protected] +1 704 333 0591 March 11, 2020 – PepsiCo, Inc., NASDAQ:PEP (Pepsi), an American multinational food, snack, and beverage corporation, announced it has entered into a definitive agreement to acquire Matt Preece Rockstar Energy drinks, a move that puts the food and beverage giant in position to compete Managing Director with its rivals head-on for dominance in the rapidly growing energy set. Within Pepsi’s current [email protected] product portfolio, Rockstar joins a limited range of energy beverages housed under the +1 704 731 7186 Mountain Dew Brands. MTN DEW AMO offers four flavors in 16 oz. cans, while MTN DEW Kickstart is a caffeine-added blend of juice and Mountain Dew. Pepsi also distributes coffee Garett Poston energy products through its partnership with Starbucks Coffee.5 Managing Director [email protected] January 23, 2020 – Keurig Dr. Pepper Inc. (NYSE: KDP), a large +1 213 593 4544 US-based beverage manufacturing company, acquired Limitless Coffee, a Chicago-based caffeinated sparkling water brand. The deal is part of the larger trend of beverage giants looking to bring on sparkling water brands in order to fill the void created by slowing soda sales. The addition of Limitless continues the expansion of KDP’s already strong water portfolio, which includes CORE Hydration, Bai, and evian, but also looks to capture the growth from an increase in caffeine consumption nationwide.6 Copyright © 2020 Deloitte Development LLC. All rights reserved. Consumer products and retail quarterly update 2 Macroeconomic and consumer products and retail sector outlook US gross domestic product1 US treasury yield curve2 $25.0 5.0% (nominal vs. real) 2.5% $20.0 4.0% 2.0% $15.0 3.0% YoY percent change 1.5% $10.0 2.0% 1.0% Interest rate $ in trillions $5.0 1.0% 0.5% $0.0 0.0% 0.0% -0.5% Real Yield (%) Nominal Yield (%) US unemployment rate3 ISM nonmanufacturing index 10.0% 1,600 and consumer confidence index4 64.0 145.0 9.0% 1,400 62.0 135.0 8.0% 1,200 60.0 125.0 Jobless claims (thousands) 7.0% 1,000 58.0 115.0 Consumer confidence 56.0 105.0 6.0% 800 54.0 95.0 5.0% 600 52.0 85.0 % unemployment 4.0% 400 50.0 75.0 ISM Nonmanufacturing 48.0 65.0 3.0% 200 ISM Non-Manufacturing Consumer Confidence Initial Jobless Claims Unemployment Rate (%) US per capita disposable income5 Monthly total US retail sales6 ($ in thousands) ($ in billions) $52.0 $650.0 $50.0 $48.0 $600.0 $46.0 $550.0 $44.0 $ in thousands $42.0 $500.0 $ in billions $40.0 $450.0 $38.0 $36.0 $400.0 $34.0 $350.0 $32.0 $300.0 Copyright © 2020 Deloitte Development LLC. All rights reserved. Consumer products and retail quarterly update 3 Consumer products and retail sector breakdown and trading statistics1 Past 12 months NTM % of 52- Median Median LTM Median Median Number of EV/ EV/ EV/ Sector week revenue CAGR EBITDA EBITDA enterprise companies revenue EBITDA EBITDA high (3-yr) ($m) margin value ($m) Beauty and cosmetics 10 51.0 % 4.7 % $872.5 16.2 % $7,858.7 1.7 x 13.3 x 11.8 x Food and beverage 10 85.0 0.5 2,844.9 19.9 35,069.9 2.7 16.1 14.8 Home and garden 10 62.9 2.6 779.4 14.4 7,316.0 1.3 9.0 11.0 Restaurant and food services 18 49.5 4.3 399.5 12.0 3,193.0 1.1 10.3 12.3 Apparel and specialty retail 10 41.8 4.9 477.7 14.6 4,272.3 0.9 6.5 9.3 Consumer products index 58 57.4 % 3.2 % $532.5 15.2 % $6,113.2 1.4x 10.2x 11.5 x Public comparable three-year stock market performance2 S&P 500 Index 16.34% NASDAQ Composite Index 43.19% Consumer Index* -23.92% 100.0% 80.0% 60.0% 40.0% 20.0% 0.0% (20.0%) (40.0%) S&P 500 Index NASDAQ Composite Index Consumer Index *Consumer index companies listed on pages 6 and 7 in the Appendix. Copyright © 2020 Deloitte Development LLC. All rights reserved. Consumer products and retail quarterly update 4 Select recent consumer products and retail M&A transactions1 Last Twelve Months Enterprise value EV/ Announce date Target and acquiror Target business description (EV) EBITDA March-20 Rockstar, Inc. Rockstar, Inc. engages in the manufacturing, bottling, $3,850.0 N/A x PepsiCo, Inc. distribution, and marketing of energy drink products. January-20 Delphi Technologies PLC Delphi Technologies, PLC provides automotive parts and 3,796.0 7.6 BorgWarner Inc. equipment for original equipment manufacturers. March-20 Li & Fung Limited Li & Fung Limited is a Hong Kong-based supply chain manager 2,230.3 5.2 GLP China Holdings Limited primarily for US and EU brands and stores. February-20 Magazine zum Globus AG 1,034.4 N/A Owns and operates a chain of department stores in Switzerland. The Central Group; SIGNA Holding GmbH January-20 Zhuhai Holdings Investment Group Limited Zhuhai Holdings Investment Group Limited is a Hong Kong- 842.9 6.1 Yahoo Japan Corporation based holding company principally engaged in export/import. July-19 Stein Mart, Inc. Stein Mart is an American discount men and women's 618.0 4.5 Kingswood Capital Management, LLC department store chain based in Jacksonville, Florida. July-19 The Habit Restaurants, Inc. The Habit Burger Grill (Habit) is an American fast casual 590.0 9.3 Yum! Brands, Inc. restaurant chain that specializes in charbroiled hamburgers. January-20 Renk Aktiengesellschaft Renk AG manufactures testing systems and parts for civilian 579.0 6.2 Triton; Triton Fund V L.P. and industrial vehicles. February-20 Yanfeng Automotive Interior Systems Co., Ltd. Yanfeng Global Automotive Interior Systems is a global supplier 379.0 N/A Yanfeng Automotive Trim Systems Co., Ltd. of interior equipment for the automotive industry. January-20 Liaoning Cheng Da Co., Ltd. Liaoning Chengda Company Limited is engaged in export and 312.0 N/A Guangxi Xinyixin Commercial Services Co., Ltd. import, trading, property leasing, and warehousing. Annual consumer products and retail M&A transaction volume2 3,500 3,213 3,199 3,041 2,874 3,000 2,772 2,603 2,607 2,479 2,500 2,369 2,212 1,983 2,000 283 1,500 Number deals of 1,000 500 0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Undisclosed <$100M $100-$250M $250-$500M $500-$1B >$1B Deal value Copyright © 2020 Deloitte Development LLC. All rights reserved. Consumer products and retail quarterly update 5 Appendix Consumer products and retail trading multiples1 Last twelve months NTM % of 52 Week Enterprise EV/ EV/ EV/ Company (ticker) high LTM revenue LTM EBITDA EBITDA margin value ("EV") Revenue EBITDA EBITDA ($ in millions) Beauty & cosmetics (10) Colgate-Palmolive (India) Limited (BSE:500830) 76.4 % $601.6 $159.5 26.5 % $4,387.8 7.3 x 27.5 x 24.6 x Coty Inc.