Consumer Comparable Companies: Choosing the Right Peers

Introduction

A comparable companies table looks objective: a list of peers, their multiples and a median. In consumer, the hard part happens before any number is calculated. Most consumer companies sell several categories through several channels in several countries, so the obvious peers are often not the right ones, and the choice of peers can move the valuation by several turns of EBITDA.

The advisors on Mars' acquisition of Kellanova showed how much the grouping matters. Goldman Sachs split its selected food companies into a snacking group, made up of Hershey, Mondelēz and PepsiCo, with a median of 14.8x next-twelve-months EBITDA, and a center-of-store group, made up of Campbell Soup, Conagra, General Mills, J.M. Smucker and Kraft Heinz, with a median of 9.9x, according to Kellanova's merger proxy statement. Kellanova, with its Pringles and Cheez-It snacks alongside cereal and other foods, sat between the two, and its value depended on how much weight each group received in a blended multiple. Why snacking trades above center-of-store grocery is explained in what drives consumer and retail valuation multiples; this article explains how bankers build consumer peer sets, make the numbers comparable and read the output.

The generic method, covered in the Valuation guide's selecting the peer group: criteria that matter, applies in full. Consumer companies simply make it harder, for three reasons.

First, portfolios are mixed. A packaged food company may own fast-growing snacks and declining canned goods; a household products company may sell premium beauty and commodity paper towels. Second, the business model varies within one industry: a franchisor and a restaurant operator sell the same burgers but earn very different returns, and a brand that owns its stores is a different business from one that sells through wholesale. Third, geography and currency matter, because many of the closest peers for a global brand are listed in Europe and report under different accounting rules.

Bankers start from the company's own economics and look for peers that share them, rather than starting from a list of famous names. The criteria below decide which companies belong in the core group.

Separating sub-sector peer sets

The first cut is between the big families of the sector, because each trades on different drivers. Staples peers are judged on organic growth and margin stability; discretionary brands on brand heat and the cycle; retailers on comparable sales, unit growth and leases; and restaurants on unit economics and the franchise mix. A retailer belongs with retailers of the same format, not with the brands it sells, and a restaurant franchisor belongs with other franchisors rather than with operators, for the reasons set out in valuing restaurant companies: operators vs franchisors. Mixing families produces a median that describes no real business.

Tiered peer groups

Tiered Peer Group

A comparable companies set organized in layers: a core group of the closest comparables and one or more broader groups covering parts of the business or adjacent categories. Tiers let bankers show how sensitive the valuation is to the choice of peers and blend groups for companies with mixed portfolios.

Because no single list fits a mixed company, bankers often build tiers: a core group of close comparables and broader groups for each part of the business, each shown with its own median and range. In the Kellanova proxy, Lazard used a snacking group and a diversified grocery group that added Post Holdings to the center-of-store names. Its snacking group traded at 14.3x to 14.9x estimated 2025 adjusted EBITDA, and its diversified grocery group at 9.1x to 12.1x. Lazard then applied a range of 11.0x to 13.5x to Kellanova's 2025 adjusted EBITDA.

Both advisors also stated that none of the selected companies was directly comparable to Kellanova, a caveat that appears in nearly every fairness opinion and is worth taking literally.

Once the peers are chosen, the numbers must be put on the same basis, and consumer companies make this harder than most sectors.

Calendarization

Adjusting each company's financial figures to a common period, usually a calendar year or the same last-twelve-months window, by combining parts of different fiscal years. It is essential when peers have fiscal years ending in different months, as retailers ending in January and food companies ending in May often do.

Fiscal years are the first issue. Most US retailers end their year around the end of January, many food companies end theirs in May or June, and others use the calendar year, so "fiscal 2025" can mean very different periods. Bankers calendarize every peer, or use the same last-twelve-months window, before comparing multiples.

EBITDA definitions are the second. Companies adjust for different items, and stock-based compensation is a frequent difference: in its analysis of Kenvue for Kimberly-Clark, J.P. Morgan used estimated 2026 adjusted EBITDA after stock-based compensation, applying a range of 11.0x to 15.0x, according to Kenvue's merger proxy statement. A peer set mixing EBITDA before and after that cost would be inconsistent by a turn or more for some companies.

Inventory accounting is the third, and it matters most for grocers and discount retailers. US GAAP allows LIFO (last in, first out), and many US food retailers use it, while IFRS prohibits it, so European peers use FIFO or weighted-average cost. When product costs are rising, LIFO charges the newest and most expensive purchases to cost of goods sold, which lowers reported gross margin and EBITDA but also lowers taxable income, so the LIFO company keeps more cash. Kroger reported a $157 million LIFO charge for fiscal 2025 and gives guidance on FIFO operating profit, a measure that excludes it, according to its full-year results. Bankers put every peer on the same basis, usually by adding back the LIFO charge, before comparing margins or EBITDA multiples.

Lease accounting across borders

The same Kenvue analysis used a peer set that included European companies such as Unilever, Reckitt, Haleon and Beiersdorf alongside Procter & Gamble, Colgate-Palmolive, Church & Dwight and Clorox. Including international peers widens the pool for a global brand, but for lease-heavy sectors, mixing regions raises a further problem of accounting comparability.

How lease obligations are added to debt and earnings is explained in lease-adjusted leverage and fixed-charge coverage.

The output is a range, not an answer. Bankers place the company within the range using the valuation drivers that separate premium peers from discounted ones: growth, margin stability, brand strength and cash conversion.

Bankers often go further and plot peers' multiples against their expected growth or margins. Where a clear relationship exists, the company's position on the line suggests the multiple its own growth supports, and a company well below the line may be undervalued or may carry a risk the chart does not capture.

Timing matters as well. Consumer multiples move with interest rates and investor appetite for defensive stocks, so a peer set's current multiples may sit well above or below their long-run average. Bankers often show current multiples alongside a historical average for the same peers, so a client can see whether its discount is new or longstanding.

These are false peers: companies that look similar from the outside but trade for different reasons. Other frequent errors include choosing peers by brand fame rather than economics, ignoring differences in private label exposure, and comparing a company's current-year multiple with peers' forward multiples. Trading comparables also exclude the control premium that buyers pay, which is why bankers present them alongside the precedent transactions covered in consumer precedent transactions and brand premiums.

For a coverage banker, the peer set is an argument about what kind of business the client really is. The most persuasive comps pages make that argument explicitly: these are the companies investors compare us with, this is where we sit among them, and this is why.