Private equity firms need to bridge the execution gap in consumer and retail sectors, says FTI Consulting

FTI Consulting’s 2026 Private Equity Value Creation Index suggests that for consumer packaged goods and retail investors, the biggest gains are not necessarily found in entirely new playbooks, but in closing the distance between what sponsors say they value and what portfolio companies can actually execute.

The firm’s survey of more than 550 private equity decision-makers, including sector-specific responses from CPG and retail leaders, points to a familiar pattern: the lev...

ers that look most attractive on paper are often the ones that prove hardest to deliver after close. In retail, supply chain, procurement and operations have moved from seventh place in 2025 to the top of the priority list for 2026, even though FTI says that area has historically missed its business case in 37% of cases. In CPG, investors are still trying to protect margins while pushing growth, with cost structure optimisation, pricing, customer health and commercial execution all high on the agenda.

The message across both sectors is that identifying the right lever is only the starting point. The real task is execution, and the window for capturing value can be short.

Retail offers the clearest example of how that gap shows up in practice. FTI argues that supply chain has become a proxy for a wider operating challenge: revenue may be available, but whether it turns into durable profit depends on how well the business handles availability, fulfilment, procurement and operational discipline. Sponsors increasingly treat these capabilities as central to the investment case because they determine whether growth can be scaled efficiently.

Yet the same functions that are now most prized are also among the weakest performers after acquisition. Procurement and supply chain regularly appear near the top of value-creation priorities, but they are often underdeveloped in execution. FTI says that many companies still treat supply chain as a cost bucket to be managed rather than a value lever to be designed.

That is where the leakage accumulates. The consultancy points to maverick spend, rebate mismanagement, inventory trapped in the wrong parts of the business and demand-supply imbalance as recurring sources of value erosion. Individually, these issues may look too small to matter. Together, FTI says, they can amount to 200 to 400 basis points of trapped EBITDA in a typical mid-market consumer or retail platform.

Procurement is one area where the gap is especially visible. Having contracts in place is not the same as controlling spend, and FTI says many portfolio companies lack the compliance mechanisms needed to stop off-contract buying and other forms of leakage. It estimates that non-compliant activity can erode 3% to 8% of addressable spend even after formal sourcing work has been completed.

Trade terms are another underused source of value. In consumer and retail businesses, rebates, allowances and vendor funding can be substantial, but many mid-sized companies do not have systems robust enough to track, claim and audit them properly. FTI describes this as one of the quickest wins in a 100-day plan.

Inventory management remains another persistent weakness. Too much stock can sit in the wrong SKUs while the fastest-moving items are understocked, often because sales and operations planning is still handled in spreadsheets rather than through a disciplined operating process. The result is that cash is tied up in the wrong places while lost sales continue elsewhere in the business.

Supplier concentration and tariff exposure add a further layer of risk. FTI says tier-one supplier maps are common, but visibility further down the chain is often lacking. That leaves businesses exposed to geopolitical shocks, geographic concentration and single-source dependencies that may be noted during diligence but pushed down the agenda after completion.

Logistics is another area where inherited arrangements can be expensive. Freight and carrier contracts are often fragmented, especially in buy-and-build platforms, and FTI says mode optimisation and consolidation can create a 5% to 10% freight cost opportunity if someone takes ownership of it.

The underlying problem, according to the consultancy, is frequently not just cost but governance. Procurement, planning and finance often work from different systems and do not share a common view of demand, supplier risk or financial impact. By the time the profit and loss account reflects the issue, the leakage has already occurred.

The same broad dynamic applies in CPG, though the emphasis is different. Here, investors are balancing margin protection with renewed attention to growth. Cost structure optimisation sits at the top of the 2026 priority list, but pricing, customer health and product or market expansion remain central. Several of those growth levers have historically underperformed their business cases, which means sponsors are not simply looking for more initiatives, but for stronger discipline around the ones already in place.

Pricing remains the standout example. FTI says it is both the number one perceived value lever and the top use case for artificial intelligence in CPG, with 79% of respondents reporting benefits within the first year and 70% saying it is very or mostly easy to implement. Even so, the firm says pricing still carries a 28% miss rate against business case in the sector, the widest gap among CPG’s top-ranked levers.

The same tension appears in customer health and product expansion. Both are rising in importance, yet both have a 37% historical underperformance rate, according to FTI. Sales force effectiveness and marketing execution remain difficult as well.

For sponsors, the lesson is that growth has to be managed as a system, not just announced as a target. That means building the data, the commercial controls and the accountability needed to tell the difference between repeatable growth and short-term uplift.

The report also argues that sequencing matters. In CPG, cash conversion and working capital optimisation remain some of the most reliable levers, with 86% of respondents reporting first-year realisation from working capital initiatives and 79% doing so from pricing, compared with 47% for product and market expansion. Rapid, dependable gains, FTI suggests, can help fund more complex growth work.

The company’s findings on working capital reinforce that point. In a separate part of the 2026 Index, 52% of surveyed private equity firms said their working capital initiatives exceeded the original business case, underscoring its role as a dependable source of liquidity. For retailers especially, working capital remains one of the fastest ways to release cash even as attention shifts towards more ambitious operational fixes.

That does not mean working capital has become less important in retail. Rather, it suggests investors are looking for the next layer of value after the more mature efficiency levers have already been harvested. In the 2026 survey, cash conversion and working capital optimisation fell from second place in perceived value to seventh place in priority for retail, even though it has only a 3% historical underperformance rate and delivers 84% of its value within the first year.

M&A presents a similar contrast. In retail, it ranks low in perceived value but much higher in priority, moving up four places to number five in the 2026 rankings. FTI says 76% of retail respondents use the lever sometimes or very often, yet only 33% describe it as very or mostly easy to implement. The payback profile is also slow: just 30% of the value is realised in the first year, with the remaining 70% coming later.

That creates a sequencing question for sponsors pursuing buy-and-build strategies. If deals and integration are central to the thesis, then the business must also have the operating discipline to support them. FTI’s data suggest that cash conversion, with its faster and more reliable payback, can help finance that journey while integration work unfolds.

The broader implication is that exit readiness begins much earlier than the final sale process. Retail investors, according to FTI, place the greatest weight on market positioning and competitive differentiation, while CPG investors focus first on the strength and scalability of the revenue model. In both cases, what buyers will want to see at exit should shape the work done during the hold period.

That also means the capability gap matters. FTI says only 33% of CPG and retail respondents report having extensive, deeply embedded operations teams, while 49% said they had exceeded their business case over the previous 12 months. Where sponsor-side resources are thin, closing execution gaps becomes not just an operating challenge but a resourcing one.

The conclusion is straightforward. In retail, supply chain, procurement, inventory and fulfilment need to be treated as core elements of the value-creation plan from day one. In CPG, pricing, customer health, channel economics and revenue management need to be tested for durability, not just upside. Across both sectors, the sponsors most likely to win are those that spot the gap between ambition and execution early, then close it before the hold period runs out.

Source: Noah Wire Services