Does size matter?

Since the 1980s, management teams and boards in the consumer packaged goods (CPG) industry have been on a quest to get bigger — the conventional wisdom being that shareholder returns will be best for companies with big brands and the scale to compete across markets. But our examination of the record for US companies shows that this assumption over the past decade has turned out to be misleading.

In his recent Strategy& article, “Does size matter? Rethinking the importance of scale in consumer goods companies”, our partner Steffen Lauster has demonstrated instead that the best performers from the perspective of total shareholder returns have been companies with more focussed product portfolios, supported by three to six differentiated capabilities. These companies exhibit coherence — their capabilities, product portfolios, and market strategy fit closely together. Coherence allows these companies to be efficient in their activities, disciplined about their portfolios, and unmatched at the capabilities that matter most to customers. In the US market at least, these factors seem to be winning against the alternative of greater scale and wider business scope.

Please click here to download a copy of the pdf “Does size matter? Rethinking the importance of scale in consumer goods companies” article. You may also be interested in browsing our consumer and retail quarterly newsletter: C&R Foresight.