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(Cpg brain) activist investors- gift and a curse

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  T he rise of the activist investor in the last two decades has been well documented but with regards to consumer staples, we felt the recent uptick of activist activity in the deserved some light. At CPG Brain, we’re pro investor and see activist investors as a necessary check on management after wayward performance but we’re also a little uncomfortable with activists wielding an overbearing influence over capital allocation decisions especially considering their spotty record activists once they have a seat at the table.   It speaks to the power activist funds have that legendary Carl Icahn is preparing to hold McDonalds, arguably the most iconic American company, feet to the fire over the treatment of pigs. We applaud Icahn’s concern with how pigs are treated but with a £50,000 stake in the company, it’s was a surprise McDonald’s sought to put out a response to Icahn’s threat of a proxy fight. No company wants to go through as they’re expensive and may complicate strateg...
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(CPG Brain) Consumer staples and pricing power: a love affair gone sour?

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    “ The single most important decision in evaluating a business is pricing power. If you've got the power to raise prices without losing business to a competitor, you've got a very good business. And if you have to have a prayer session before raising the price by 10 percent, then you've got a terrible business”. (Warren Buffet)         When writers use block quotes like the one above, it’s usually for effect or give lens into what’s to follow or sometime just use someone’s else's word instead of theirs to give their fingers a break (guilty as charged). However, in this case, the block quote from famed investor Warren Buffet pretty much is why wrote article many companies, thanks to rising inflation and supply chain costs, dread: do you have pricing power?   For many, growth stocks Inflation and threat of interest rates has hit them hard but nothing hits harder than finding out after years growing and establishing a business that you ...
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(CPG Brain) Unilever: the battle of Unilever 2021/22 is over but the war has begun.

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  It’s over! The great Unilever shareholder rebellion or 2021/22 has come to an end after CEO Alan Jope listened (read got his arm twisted) to his shareholders and announced Unilever will not pursue further M&A along with a massive 3bn share buyback program and 1500 in job cuts.   We thought the company was moving too fast into consumer health but how quick they drooped their plans under shareholder pressure was a relief but also a little concerning (more on that later) This is a major win for shareholders stopping the company’s management making an expensive pivot to consumer health largely in reaction to rising production costs and COVID-19 related supply chain disruption . Management plans to pivot to consumer health would see Unilever almost certainly take on more debt which bad for shareholders as it muddies Unilever’s strong balance sheet and may eventually see the company announce a dividend cut. Add to that the company potentially risking a credi...
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