From Complexity to Clarity: Divestitures Reshaping the Future of Retail and CPG

From Complexity to Clarity: Divestitures Reshaping the Future of Retail and CPG

The retail and consumer packaged goods (CPG) industry is facing mounting pressure to adapt to rapidly evolving market dynamics with global uncertainties, geopolitical tensions, and restrictive trade policies leading to challenging environments for business. As the business landscape is evolving fast, enterprises are dynamically reshaping their portfolios to maintain a competitive edge, and divestitures have emerged as a strategic lever to unlock value and sharpen focus. The transformative power of digital technology and continued advancement in AI, shifting consumer behaviors, complying with sustainability and ESG regulatory requirements, strategic realignment, and reducing overall risk are forcing legacy retail and CPG companies to rethink their business models. This allows organizations to refocus on core brands, shed underperforming or non-aligned assets, and unlock value in businesses that may thrive better outside the parent company’s structure.

Growing Trend of Divestiture Among Enterprises Across the Retail and CPG Industry

Retail and CPG companies increasingly leverage targeted divestitures and carve-outs to concentrate resources on their highest-growth, most strategically aligned segments, while unlocking trapped value in businesses that may scale independently. This trend is evident in several high-profile carve-outs and spin-offs across the industry.

As seen in the above illustration, across the retail and CPG landscape, from Nestlé carving out its water business to Unilever separating its ice cream portfolio, divestitures are no longer just financial maneuvers; they are strategic resets. The motivations driving these strategic divestitures can be broken down across five key dimensions:

1. 1. Divestitures allow enterprises to sharpen their brand focus, accelerate innovation, and reposition the enterprise for long-term resilience. By shedding assets that no longer fit the future vision, companies become more agile in responding to disruptive consumer shifts, regulatory pressures, and competitive market forces. This enhances brand relevance, improves profitability, and recalibrates ROI through more focused operational strategies, supporting sustainable growth for both the core and divested entities.
   2. As companies evolve to stay competitive, many are divesting non-core or misaligned segments, allowing organizations to channel leadership attention, capital, and innovation efforts into areas where they hold a clear competitive advantage. Carve-outs also unlock shareholder value, surfacing the hidden potential of high-growth businesses that may be undervalued within a larger conglomerate. As these businesses stand alone, investors gain clearer visibility into performance metrics, enhancing market confidence and valuation.
   3. By shedding units with distinct supply chains, regulatory demands, or customer bases, companies are streamlining their organizational structure, improving agility, and driving better margins through faster decision-making. For many, divesting underperforming or declining assets is a pragmatic move to clean up financials and refocus on profitable growth. It is not just about what to keep but what to leave behind to thrive.
   4. Risk containment is also crucial; divesting high-risk or litigation-prone businesses enables firms to ringfence potential liabilities, safeguarding their broader balance sheet and reputation.
   5. Lastly, a favorable market environment, fueled by robust mergers and acquisitions (M&A) activity and active private equity interest, has created a natural window of opportunity.

Key Considerations That Enterprises Take During Carve-Outs

As retail and CPG companies increasingly pursue carve-outs to refine their portfolios and sharpen strategic focus, meticulous planning and execution are critical for ensuring a seamless transition and long-term value creation. Enterprises should address key areas such as benchmarking, process planning, strategic contracting, and supplier negotiation management.

1. 1. Benchmarking: Enterprises should consider benchmarking as a foundational step in establishing should-cost budgets for post-separation operations. By leveraging comparative data, they can define cost-to-serve models, target organizational structures, and funding frameworks that enable both the divested and retained entities to operate efficiently and remain competitive in the new setup.
   2. Process planning: Enterprises should conduct detailed data collection across shared services (HR, treasury, and cybersecurity), ERP systems, and core platforms (for example, SAP, Oracle, and Salesforce). Businesses can then use this data to create detailed separation plans with clear target outcomes, such as system transfer, clone-and-cleanse, or outsourcing. This data helps define the scope and timeline of transitional services agreements (TSAs), prioritize application inventories based on criticality and vendor dependencies, and ensure a streamlined, low-risk technology separation.
   3. Strategic contracting: Enterprises should prioritize strategic planning in contracting to support carve-out initiatives. Existing supplier agreements are proactively analysed to align with the carve-out strategy, ensure flexibility for executing split plans and TSAs, and facilitate independent operations post-separation. Early supplier engagement is a standard practice to renegotiate or amend agreements, securing favorable terms, pricing, and timelines while minimizing costly post-separation negotiations. The combined business scale prior to separation is leveraged to establish duplicate supplier accounts, relationships, and master service agreements (MSAs), reinforcing procurement capabilities on both sides of the carve-out. The separation process also acts as a catalyst to eliminate unnecessary costs, rationalize unused software licenses, strategically allocate supplier volumes, and secure favorable renewal protections.
   4. Supplier negotiation management: Enterprises should develop pre-divestiture negotiation playbooks and deviation matrices to support consistent supplier negotiations. This will ensure clearly defined escalation paths for nonstandard terms and maintain compliance with legal and organizational policies. This approach safeguards value and minimizes operational disruption throughout the separation life cycle.

Future Landscape

In a volatile market environment, more companies are expected to reshape their portfolios to remain lean, competitive, and responsive to evolving consumer and investor expectations.

1. 1. Private equity firms will play a major role; they are seizing opportunities to acquire non-core or underperforming brands, aggressively acquiring divested retail and CPG brands, driving brand revivals, and consolidating categories through platform plays. Here are some recent examples:

• • Yellow Wood Partners has built a portfolio of carve-outs such as Suave (from Unilever) and Elida Beauty, leveraging operational expertise to reignite growth.
  • Sycamore Partners announced in March 2025 its plan to acquire Walgreens Boots Alliance, aiming to transform the struggling retail pharmacy chain by taking it private and restructuring its operations.
  • 3G Capital announced in May 2025 its agreement to acquire Skechers for $9B, marking one of the largest footwear buyouts to date, with plans to enhance operational efficiency and expand global reach.
  • New firms such as Forward Consumer Partners ($425M debut fund) and MPearlRock (MidOcean Partners/Kroger JV) are entering the competition, targeting emerging brands with scalable direct-to-consumer

This reflects that private equity firms will continue to capitalize on divestitures, transforming underperforming brands and aiming to convert them into standalone powerhouses or category platforms.

1. 2. Technologies, such as advanced analytics and AI, will enable faster, evidence-based decisions on separation strategies, while creative deal structures, including spin-offs, partial IPOs, and joint ventures, will gain traction. Private equity and large retailers will remain active buyers, reshaping categories and consumer ecosystems.
   3. Enterprises will continuously realign geographic footprints to capture emerging demand in high-growth markets. This includes adapting go-to-market models, supply chains, and product portfolios to stay ahead of regional shifts in consumer behavior.

In this evolving landscape, separation excellence will no longer be episodic—it will be a core organizational capability, enabling businesses to stay lean, adaptive, sustainable, and consumer-centric.

By Harvey Gluckman, Sahaj Kumar, Norkit Lepcha, and Amar Verma