Consumer sector comment – October 2012

Date

High street stores are seeing rising sales from mobile commerce. According to the Centre for Economics and Business Research, £1 in every £10 spent in the UK comes via the mobile channel. September saw the announcement that Square, a US mobile payments venture, started by Twitter’s Jack Dorsey had been valued at US$ 3.25 billion in its latest round of fundraising. The company still only has revenues of around US$ 200 million. Square’s main product is a small square-shaped reader that plugs into Apple and Android devices to allow merchants, previously only accepting cheques and cash, to accept credit cards by swiping them through the dongle. In the 3 years since it has been in operation, Square has grown from US$ 1 billion in annual payments processed to US$ 8 billion.

In August, Starbucks announced that customers would be able to use Square payments in US stores at the same time as making a US$ 25 million investment in the company. This was seen as a sign that mobile payments are about to go mainstream in physical retail. So far, Square has focused on the US. iZettle, a Swedish-based mobile payments company has launched a similar service in the UK for small businesses and sole traders. The appeal of these services goes beyond making payments as the smartphone app used by customers also acts as a mobile digital wallet allowing businesses to tie in customers with loyalty programmes, discounts and special offers. Meanwhile, Bango, a British mobile payments firm saw it shares soar after launching a tie-up with Facebook to allow UK purchasers to gain content such as game extensions and virtual gifts and charge it to their monthly network bill.

It is still early days but it is clear the mobile payments business will become an increasingly important part of the retail landscape.

Deals

Tesco Plc. has announced the acquisition of e-book platform provider Mobcast Services Ltd. for £4.5m. This forms part of a string of acquisitions in the sector, which includes TV streaming service Blinkbox in 2011 and personalised internet radio service We7 in June 2012. Tesco Digital Entertainment chief executive Michael Comish said: “Mobcast will help us offer even more choice for the large and growing number of customers”.

Toy specialist Hamleys Group Ltd. has been bought by French toy retailer Groupe Ludendo S.A.. Jean-Michel Grunberg, Chairman of Ludendo said: “Hamleys will give us the platform to accelerate our international development starting with the UK and into new markets”. The deal value is estimated to be around £60m.

FF&P Private Equity, the private equity business of Fleming Family & Partners, has backed the management buyout of David Phillips Furniture Ltd. FF&P which has invested £8 million in the furniture provider to professional residential property will take a majority stake in the business.

Bruichladdich Distillery Company Ltd. has been acquired by French drinks manufacturer Remy Cointreau for £58m. The acquisition marks the French company’s first move into the premium single malt Scotch whisky market.

Oliver’s Babycare Ltd. an online baby goods retailer has been bought by EDPA Ltd, an online retailing group with interests in the nursery industry and health and personal care products. Gerad Barclay, managing director of EDPA stated that the move will enable “EDPA to reach a broader market, with an expansion of our product range with items suitable for children up to the age of five years”.

Forest Holidays LLP, a rural holiday accommodation specialist has undergone a management buyout (MBO) supported by a “significant” investment from private equity firm LDC, the private equity arm of Lloyds Banking Group. Chief executive Gary Fletcher said: “LDC’s investment and support brings additional strategic input and financial backing to our business and will help us to deliver our ambitious growth plans”.

Litebulb Group Ltd. announced the acquisition of Scarlett Willow Ltd, adding it to the growing portfolio of brands and complementing the continued rapid organic growth. Scarlett Willow is an award-winning brand, which manufactures and designs products of traditional quality with a modern design.