Why Consumer Now.

There is a tension at the heart of private equity's relationship with consumer investing. On one hand, consumer businesses are universally understood. Everyone has opinions about what brands they love, what restaurants they return to, what wellness rituals they have adopted. On the other hand, the sector has been persistently underweighted by institutional capital at the exact moments when the opportunity is most acute.

The consumer cycle is not a mystery. It compresses, it resets, and when it does, it rewards those who were paying attention before the crowd arrived.

We are in one of those moments now.

Consumer is not a sector that moves in a straight line. It breathes with the economy, contracts during inflationary periods, and expands as confidence and spending recover. This cyclicality is often cited as a reason for caution. We believe it is, in fact, the foundational case for entry.

The 2021–2023 period was defined by a confluence of forces that temporarily distorted the consumer landscape. Pandemic-era demand surges created inventory overhangs. Supply chain disruptions compressed margins. The sharpest interest rate cycle in four decades raised the cost of capital and forced brands to confront structural weaknesses that low-rate environments had allowed them to paper over. The result was a broad-based valuation compression across consumer assets.

That correction is now creating conditions that experienced investors recognize. Median EV/EBITDA multiples for sub-$1 billion transactions settled at approximately 12.8x in 2024, meaningfully below the 15.5x observed in larger deals, and well below the frothy peak of the ZIRP era. For founder-led and family-owned consumer businesses in the lower middle market, entry multiples are often even more attractive: we are seeing opportunities to acquire high-quality brands at 2 to 3 times below where comparably scaled businesses traded just three years ago.

The distress is selective, not systemic. Debt maturities, succession events, and founder fatigue are all driving deal flow in a segment of the market that has rarely been better positioned for acquirers.

History is clear about what follows. According to research by Moonfare and Neuberger Berman, funds raised during or shortly after market dislocations, the 2001 and 2009 vintages being the most cited examples, generated among the highest returns of any cohort over the past two decades.

The same dynamic is setting up now for consumer. The entry window, which we place in the 2024–2026 period, is defined by suppressed valuations, motivated sellers, and a structural shift in the economy that is only beginning to favor brands built on identity, wellness, and experiential engagement. The value creation period runs from there through 2027–2029. And the exit tailwinds are likely to emerge in the early 2030s, precisely when a fund deploying capital today would be approaching its harvest phase.

To understand why the opportunity in consumer is especially concentrated in the lower middle market, it helps to understand a structural gap that the industry has not adequately addressed.

Private equity as an asset class was built around scale, standardization, and financial engineering. The canonical PE playbook, financial leverage, cost optimization, salesforce efficiency, ERP implementation, was designed for large, institutionalized businesses with $100 million or more in EBITDA. The operators who execute this playbook are skilled at running systematic processes. They are generalists when it comes to sector, and specialists when it comes to process.

Consumer businesses in the lower middle market, companies with $1 million to $15 million in EBITDA, often founder-led, often with a loyal but regional or niche following, require something different. They need operators who understand brand identity, channel strategy, community building, and the intangible levers that differentiate a brand customers love from a brand they merely purchase from.

This segment is too small for traditional PE, too operationally complex for venture. It falls between categories. And because it falls between categories, it is frequently undercapitalized, undervalued, and asymmetrically attractive.

The cyclical entry opportunity is compelling. But the reason to build a durable thesis around consumer is that the structural changes in how Americans spend, what they value, and how they engage with brands are secular, not temporary.

• Wellness has become the new wealth. Consumers who a decade ago spent their discretionary income on luxury goods are now spending it on experiences that optimize how they feel.
• The collapse of the middle brand. Across every consumer category, the center is eroding. Mass market brands are losing share to both the economy tier and the premium tier.
• Brands as membership. The most valuable consumer brands of the next decade will not simply sell products. They will create communities.
• The premiumization of everyday staples. Food, beverage, personal care, and home goods have all undergone premiumization cycles that are still in early stages.
• Experiential consumption over ownership. Spending on identity and experience is the last category to compress in a downturn, and the first to rebound when confidence returns.

For investors who think beyond the immediate deployment window, the most compelling long-term consumer story extends beyond the United States. It is in the markets that are beginning their own consumer inflection points.

India today occupies a position in the global consumer arc remarkably analogous to the United States in the early 1990s. A rapidly formalizing economy. First-generation middle-class consumers discovering premium brands. Consumer spending in India is forecast to exceed $4 trillion by 2030, which would make it the world's third-largest consumer market.

Southeast Asia represents a different but complementary story. The region's 700 million people are in the midst of a consumer transformation driven by urbanization, rising incomes, and leapfrog digitalization. Southeast Asia's internet economy is projected to reach $600 billion by 2030.

Latin America is often underestimated in conversations about emerging market consumer opportunities. Brazil and Mexico together represent a consumer population of over 340 million people, with structural consumer fundamentals more durable than the narrative suggests.

Private equity's history is a history of vintage years. The funds that were raised in 2001, in 2009, and at other moments of dislocation and uncertainty returned to their LPs with results that justified the conviction it took to write the check. The funds raised at the peak of the cycle have faced significantly more challenging return environments.

The consumer sector today offers the combination of factors that has historically preceded strong vintage performance: cyclically suppressed entry valuations, motivated sellers creating deal flow, structural tailwinds that will compound over the hold period, and exit conditions that are likely to be meaningfully more favorable at the end of a typical hold period than they are today.

The lower middle market adds a layer of structural advantage: less competition from large PE for sourcing, greater impact from operational improvements at entry, and a multiple expansion potential that is more pronounced when you are institutionalizing a business that has never had institutional capital behind it.

We are building 8 Pillars Capital around the conviction that the next generation of great consumer brands is being formed right now, in the market segments that are least efficiently served by existing capital. Our mandate is to find them, institutionalize them, and grow them into category leaders.