The consumer sector has been hit hard by tighter macroeconomic conditions. But pockets of opportunities exist if GPs know what to look for, as Shivani Khandekar reports

Leisure and lifestyle

At a time when the consumer sector is witnessing a slowdown in investment, Italy-based Quadrivio Group is doubling down on the leisure sector. The GP is currently raising a €500m fund solely focused on lifestyle companies, and is doing so amid a challenging fundraising environment.

However, it claims it hasn’t had any issues thus far and is aiming to close the vehicle in Q1 2024. Alessandro Binello, group CEO and co-founder, credits the firm’s track record as a reason why the GP is still on track with its fundraise. However, it claims it hasn’t had any issues thus far and is aiming to close the vehicle in Q1 2024. Alessandro Binello, group CEO and co-founder, credits the firm’s track record as a reason why the GP is still on track with its fundraise.

He says: “What is helping us raise a lifestyle-focused fund in this environment is our track record – we are eyeing a 3x DPI to our investors from our first fund. Another reason why we are optimistic is because we have support from LPs who have been overexposed to healthcare and tech in recent years,” Binello tells Real Deals, concurring with Vendis Capital’s Deturck’s view.

Same as it ever was

Being selective and scrutinising the viability of a business is a point of agreement between PE professionals focusing on the consumer sector. However, this is not a new trend. Investments in the consumer sector have always required a keen eye for potential and an in-depth understanding of consumer behaviour and market dynamics to yield success.

“In reality, consumer goods have been a very good area of investment so long as you are choosing particular brands. You really have to analyse the market to understand what will sell,” adds Binello.

Quadrivio has identified affordable luxury as one pocket that will continue to do well in the short term. Broadly, it believes the lifestyle sector as an attractive proposition from an investment point of view because it enjoys margins that are “hard to find” anywhere.

Binello stresses that the Ebitda of Quadrivio’s companies in the space has been growing by 30-40%.

“If you choose well, cosmetics, fashion, food and wine can be very resilient segments and can make a big difference in terms of cashflows,” he says.

The word from PE practitioners is that greater certainty around consumer sentiment, spending tensions and the cost-of-living crisis will likely revitalise and spur demand in this space.

PwC’s summer consumer sentiment survey reveals that it has topped its 18-month high this year. While the sector might still be far away from turning a corner, the survey indicates recovery is on its way to being normal, albeit sluggishly. PwC’s summer consumer sentiment survey reveals that it has topped its 18-month high this year. While the sector might still be far away from turning a corner, the survey indicates recovery is on its way to being normal, albeit sluggishly.

The fact that some of the biggest high street retailers globally have been part of PE portfolios at some point (Asda, Pret a Manger, Reiss and Toys ‘R’ Us to name just a few) provides evidence that the sector is probably too big for the asset class to ignore completely. The fact that some of the biggest high street retailers globally have been part of PE portfolios at some point (Asda, Pret a Manger, Reiss and Toys ‘R’ Us to name just a few) provides evidence that the sector is probably too big for the asset class to ignore completely.

While it is difficult to know when M&A in the consumer sector will bounce back, Advent’s Chavanne concludes that “understanding of whether [consumer] investments will offer any significant downside protection” might do the trick for the time being.