Alliances in Consumer Goods

 

By John D. Cook, Tammy Halevy, and C. Brent Hastie

These days, global corporations routinely tie up 20 percent or more of their assets in alliances. Yet CEOs in the consumer-packaged-goods sector have historically preferred mergers and acquisitions to partnerships. This predilection is changing, however, given the pressure for earnings growth and the paucity of M&A targets in most product categories, so over the next few years we expect to see more alliances in this sector. A few companies, such as Nestlé, Procter & Gamble, and Starbucks, are already realizing good returns on their alliance activity: our analysis of 77 leading consumer-packaged-goods enterprises found that the 10 most alliance-intensive ones delivered average total returns to shareholders nearly four times larger than the rest. What is more, the highest-performing companies captured a disproportionate share of the alliance opportunities and locked in the best partners. One key to success is pursuing a full range of alliance opportunities -- not just geographic-expansion or simple co-marketing deals but also cost reduction plays and partnerships for innovation.

Notes:

John Cook is a director in McKinsey's Chicago office; Tammy Halevy is a consultant in the Washington, DC, office; Brent Hastie is an associate principal in the Atlanta office.

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