Retail, Food & Beverage

Consumer spending rose 2.2 percent in the first quarter of 2009, but major retailers are still expecting people to tighten their belts as the year progresses. Purchases of big ticket items such as cars, major appliances and home improvements are expected to decline. As a result, retail CEOs surveyed by PricewaterhouseCoopers are much less confident about revenue growth over the next 12 months.

The economic downturn in the retail industry is having a considerable impact on M&A activity. Only 6 percent of retail CEOs think that mergers and acquisitions currently offer much potential for growth and only 14 percent are planning to complete a cross-border transaction in the next 12 months.

However, the CEOs are more optimistic when they consider the growth prospects over the next three years. Ninety-two percent expect to boost sales within that time frame.

Meanwhile, the food and beverage industry is worth $1 trillion and has averaged more than 100 M&A transactions every year for the past five years. According to a report by the Food Institute, there were 348 completed M&A deals in 2007.

The grocery sub-sector was hit hard in 2008 with higher prices and high energy costs at the same time that unemployment figures rose and consumer spending declined. A decline in commodity prices has not created the drop in food prices many people expected.

In addition, traffic at restaurants declined for the second quarter in a row, according to a market research report by The NPD Group. Rising unemployment, low consumer confidence and severe weather conditions were driving factors in the 1.5 percent decline in food service traffic for the quarter ending in February 2009. Full-service restaurants sustained the steepest loss.

Sources

• 12^th Annual Global CEO Survey: Retail. PricewaterhouseCoopers.
• (May 6, 2009). NPD Study Shows Slower Restaurant Traffic, FoodBusinessNews.net
• (February, 2009). Consumers Put Brakes On Food Spending Last Year, The Food Institute.