Recent earnings growth in the US is a positive sign and there are indications that growth in Europe may follow. Valuations are high however, and we remain selective and focused when looking at new deal opportunities.
In Retail and Consumer, markets often differ by region, driven by local consumer trends.
In the retail space, three global themes remain core to sourcing activity, value/discount, specialist and controlled brands, which we adapt and apply on a local basis. With value/discount, further opportunities for rollouts and consolidation exist, as unemployment and the high cost of living continue to depress household spending. In emerging countries, low-income consumers offer the best opportunity for future retail growth. Consumer demographics are also shifting as low-income consumers become the middle classes in emerging countries, and increasingly professional retail units make stores more appealing to all. In the specialist retail arena, focused businesses continue to take market share from generalists as consumers look for the best choice, price and service within a category. Amongst controlled brands, premium and luxury goods are continuing to grow, as consumers of these products are less affected by spending constraints and through digital technologies global brands are becoming more widely known quickly.
Within the consumer products space, there are increasing opportunities as larger global groups are further rationalizing their portfolios. These are providing opportunities to look at businesses where both top-line growth and internal operational improvements are needed. Themes of health and wellness in the food and drink area, as well as household goods ensure it remains an exciting sector, though at strong valuations.
When we look at investments we consider these growth themes in the context of regional to national, and national to international. We use our industry expertise and global network to help us develop relationships with companies we judge as potential stars. We also consider the new tools and operating formats that impact sub-sectors in different ways, at DOUGLAS Holding for example, the share of internet sales has more than tripled since 2008. While we focus on our core maintenance cells, we are also on the lookout for new trends and changing themes that could result in interesting deal opportunities. Restaurants/food services and travel are two we have been developing during 2013 and The Coffee Bean & Tea Leaf is one of the latest deals executed as a result of this sourcing strategy.