Sandwiched by powerful forces?
Firms can survive intense competition through branding, innovation and economies of scale - as long as they don't make ill-informed acquisitions
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THE consumer staples sector, notably the food and beverage (F&B) sector, draws investor attention for good reason. Everyone needs food. It is an easy sector to understand.
Yet the economic theory is a bit grimmer, as F&B market structure approximates what economists call perfect competition.
In this structure, there are numerous buyers and sellers of identical products. Barriers to entry are non-existent. Firms have tiny market shares and a limited influence on prices. If a chicken rice stall tries to charge 50 cents more for a basic plate, most people will just visit the stall next door. Profit margins are thus thin and constantly under threat.
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