The Boston Consulting Group Picks Recession Winners by Targeting Long-Term Value Creation
Fast Retailing, Esprit Holdings, Shinsegae, British American Tobacco, and Imperial Tobacco Group Are the First Five Global Companies in BCG's Top 25 "Consistent Value Creators in the Consumer Industry" Over the Past Ten Years
| Source: The Boston Consulting Group
BOSTON, MA--(Marketwire - November 17, 2009) - Consumer companies suffering from the global
economic crisis should look to an elite group of sustainable value creators
that have generated sizable and consistent shareholder returns over a
decade, according to a new report by The Boston Consulting Group (BCG).
In "Lessons from Consistent Value Creators in the Consumer Industry," BCG
identifies 25 consumer companies with a market capitalization of at least
$7 billion that have consistently outperformed their local stock-market
average during the ten years from 1999 through 2008. "Rankings are limited
to the largest companies," explains coauthor Jeff Gell, a partner in BCG's
Chicago office, "because the bigger the company, the harder it is to exceed
expectations and deliver superior total shareholder returns (TSR) year
after year."
The top 25 consumer-company consistent value creators are shown on the
included image.
BCG also ranks the top ten companies from 2004 through 2008 in each of
three sectors of the industry: consumer goods, retail, and travel and
tourism. The number-one company in the consumer goods sector is KT&G
(formerly Korean Tobacco and Ginseng Corporation); in the retail sector it
is Dairy Farm, a leading retail group in Singapore; and in the travel and
tourism sector, it is SMRT, a mass-transit corporation in Singapore.
Among the key findings:
-- The average annual return for the 155 companies in the sample was 3.9
percent. The average annual TSR of the top ten across the three
consumer-industry sectors was 24.5 percent (about six times greater).
-- To qualify for the top ten in our sample of 155 global consumer
companies, a company had to achieve an average annual TSR of 20.7 percent.
The top performers achieved an average annual TSR of 30 to 35 percent.
-- Companies in the top quartile of the three consumer-industry sectors had
a TSR of at least 11 percent per year.
-- The weighted average annual TSR for the top ten consumer-goods companies
was 21.1 percent; for retailers it was 19.5 percent; and for travel and
tourism companies it was 15.1 percent.
Lessons from the Sustainable Value Creators
The main focus of this year's report, however, is on performance over an
even longer time frame. The experience of the 25 consistent value creators
suggests four distinct pathways to long-term outperformance, each with its
own preconditions, necessary management disciplines, and potential
pitfalls:
-- Growth Engines that consistently deliver sales growth well above the GDP
average -- usually 15 percent per year or more
-- Cash Machines that emphasize generating cash through margin improvement
and the direct payment of free cash flow to shareholders in the form of
dividends and share repurchases or to debt holders by paying down debt
-- Portfolio Migrators that systematically refashion the mix of their
business portfolio over time through acquisitions and divestitures in order
to move into businesses and markets with greater value-creation potential
-- Value Impresarios that use some combination of all these approaches,
shifting their emphasis to the one that has the most potential to exceed
investor expectations at any moment in time
"Lessons from Consistent Value Creators in the Consumer Industry" provides
consumer executives with a road map for sustainable outperformance at a
time when more and more investors are on the lookout for companies with a
long-term track record and a credible plan for delivering value not just
this year or the next but for many years to come.
To receive a copy of the report or arrange an interview with one of the
authors, please contact Eric Gregoire at +1 617 850 3783 or
gregoire.eric@bcg.com.
About The Boston Consulting Group
The Boston Consulting Group (BCG) is a global management consulting firm
and the world's leading advisor on business strategy. We partner with
clients in all sectors and regions to identify their highest-value
opportunities, address their most critical challenges, and transform their
businesses. Our customized approach combines deep insight into the dynamics
of companies and markets with close collaboration at all levels of the
client organization. This ensures that our clients achieve sustainable
competitive advantage, build more capable organizations, and secure lasting
results. Founded in 1963, BCG is a private company with 66 offices in 38
countries. For more information, please visit www.bcg.com.