Consumer
Cinven has successfully invested in all three of the main Consumer sub-sectors – retail, leisure and consumer goods – throughout the business cycle. In retail, we have made acquisitions in the clothing, department store, DIY, home furnishing and toy segments. In leisure, we have invested in gaming, health and fitness, pubs, cinemas, travel and restaurants. In consumer goods, Cinven has acquired food manufacturing and distribution, household goods, electrical goods, beverages, textiles and clothing businesses. Our current portfolio includes Camaïeu (women's clothing), Gala Coral (integrated betting and gaming), Gondola (casual dining) and Maxeda (non-food retailer).
Our Consumer team has deep sector knowledge and maintains a wide network of relationships with senior executives and advisors in the sector. The team is pan-European, operating from all four of our European offices. We also draw on the support of our colleagues in Hong Kong, who help our portfolio companies to grow through their expertise in Asia, usually through initiatives to enter new markets, reduce costs and improve operations.
We look for companies that will outperform in growing markets and show resilience during downturns. Our most successful investments in the Consumer sector have shared certain characteristics that we look for in each of our prospective investments.
The companies Cinven acquires are typically differentiated market leaders with a branded, well recognised offer, operating in markets that are underpinned by favourable long-term consumer trends.
Selected Investments
Clothing retailer, France, Poland, Italy
Ladies fashion wholesaler, Germany
Health and fitness clubs, UK, Benelux, Germany, Asia, Australia
Integrated betting and gaming company, Europe
Casual dining operator, UK
Non-food retailer, Benelux region
Cinemas, UK
Consumer sector experts
Guy Davison, Rebecca Gibson and Xavier Geismar
The companies Cinven acquires are typically differentiated market leaders with a branded well-recognised offer.
We favour 'high volume, low ticket' business models with multi-site operations that are present in a number of geographical regions. We are attracted by multi-channel businesses – where 'bricks and mortar' operations are augmented by a strong online distribution capability to capitalise on fast growing online markets. Finally, any business in which we invest has to show growth potential, be it through growth in its current markets (like-for-like growth and new store roll-out), geographical expansion, or market consolidation.
Experience has shown us that businesses with these characteristics tend to outperform in growing markets and, importantly, show comparative resilience in downturns. But all Consumer businesses are ultimately underpinned by consumer spending and are subject to economic cycles, so we examine each opportunity in the light of the business cycle, looking for strategies that will create value in that context.
The current downturn has brought to an end a period of unprecedented growth in Consumer markets, fuelled primarily by increased personal debt. But even in these difficult economic conditions, there are winners – such as online retailers, food retailers, manufacturers of essential household and personal care products, and retailers with strong 'value for money' credentials. More cyclical companies are also starting to recover. Looked at over a 20-year period, valuations are still below trend. All these factors support our belief that a period for fresh investment lies ahead – albeit one that will require a structured and disciplined approach.
Case study: Gondola Group
Harvey Smyth, CEO Gondola Group
In November 2009, industry peers voted PizzaExpress Best Restaurant Chain and Best Value Restaurant Chain at Restaurant magazine's R150 Awards. For the management team at Gondola Group, the award was a welcome acknowledgement: PizzaExpress accounts for around two-thirds of the revenues of the Group, which continues to outperform its peers – even in the downturn.
Gondola is a 600-restaurant casual dining operator that has strong brands, a 'high volume, low ticket' business model and strong organic growth potential, characteristics shared with many other successful Cinven investments in the sector. The Group includes PizzaExpress, ASK and Zizzi and the smaller-scale brands BYRON, Milano and Kettners; it employs around 13,500 people.
At the time of the acquisition in 2006-07, Cinven's strategy was to accelerate the 'roll-out' of Gondola's brands while controlling costs, sharing best practice across the Group, and diversifying the portfolio of brands. We strengthened the management team to help the company execute this strategy more effectively. The changes included a new Chairman, CFO, and Managing Directors of PizzaExpress, ASK and Zizzi.
Under this new management team, progress has been impressive. Despite the strong consumer downturn, the Group 's restaurant sales for the year to 28 June 2009 were £499 million, up 10.1% on the previous year, with profits (EBITDA*) up 2.4% at £106 million. Gondola opened 36 new restaurants, two more than in the previous year.
Gondola's investment and innovation in promotions and brand-building is paying off: it has won more customers, outperformed the sector on a like-for-like basis and increased gross profits compared with the previous year. The Group's sector leading marketing strategy includes online 'viral' techniques and brand partnerships as well as newspaper advertising.
At the core of Gondola's offer is delicious food, quality ingredients, interesting recipes and innovation. Recent developments have included chef Theo Randall's signature pizzas for PizzaExpress and its 'Leggera' low calorie pizza, the repositioning of Zizzi towards a younger customer-base, new menu developments at ASK, and awards for BYRON's 'proper hamburgers' concept.
* EBITDA: earnings before interest, taxes, depreciation and amortisation
