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The Wall Street Journal this morning reports that even as major CPG companies declare that they will rid themselves of non-core businesses and "unfashionable brands" that are a drag on profits, there actually is a surprising lack of divestment activity in the sector. In 2019, for example, such activity was 74 percent lower than in 2018.


The Journal writes that "portfolio sales have stalled above all because it is hard to make the math work. Selling assets for low-yielding cash typically reduces leverage and therefore earnings per share. This problem is compounded by high stock-market valuations in the consumer staples sector. Disposals of weak assets at lower valuations theoretically destroy shareholder value."
KC's View:
Which sort of sounds like companies that are behind the eight ball when it comes to competing and making a profit, may find it harder than expected to rectify whatever disadvantages they have. Disadvantages that they may have created for themselves in many cases, by being less in touch with what consumers want and less focused on actual innovation than they should have been.