Consumer goods sector is consolidating – and supply chains are de-globalising

Edcon’s sale of Edgars and Jet have changed the dynamics of the consumer goods sector.  The resultant consolidation of clothing retailers is long overdue, reckons Evan Walker, a portfolio manager at 36ONE Asset Management.

“It’s a good acquisition for them,” says Walker, referring to the current valuation compared to only a few years ago.  “Unfortunately, we need more consolidation,” warns Walker. “And I’m still nervous about the amount of space on the food side.”

Isana Cordier, Head of Consumer Goods and Services at Absa Corporate and Investment Banking, agrees.  “It sounds funny, but consumers want less choice – the need to simplify is driving behaviour.  More consolidation is likely.”’

Deglobalisation of supply chains

Covid-19 has disrupted global supply chains severely, showing the value of bringing them closer to home.

“We’ve been heading down that route for the last five years,” says Anthony Thunstrӧm, CEO at The Foschini Group (TFG).  “We’re looking at 42-day lead-times in South Africa versus 150 in the Far East. The net result? There’s far less ‘fashion risk’ as we make decisions on real-time data and we’re getting better gross margins. With Covid it’s become absolutely important. There’s too many variables out there.”

TFG has upped local manufacturing to between 30% and 40% in the last year, accelerating the process by about three years.

[23:53 to 34:34]

https://omny.fm/shows/life-podcasts/consumer-goods-sector-is-consolidating-and-supply