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The recession's over, so get on with it – that seems to be the message of a report from Grocery Manufacturers Association and PricewaterhouseCoopers LLP.
“To grow revenues in this new climate, companies will have to focus on innovation to encourage household spending, especially for products in mature segments and to offset reduced spending by Baby Boomers who are nearing retirement.”
"Consumer packaged goods (CPG) companies will need to employ different tactics than those used during the recession - divesting non-core brands, conserving cash, and cutting costs - to preservConsumer packaged goodse shareholder value as the economy recovers," according to a summary of "2010 Financial Performance Report: Forging Ahead in the New Economy."
"To grow revenues in this new climate, companies will have to focus on innovation to encourage household spending, especially for products in mature segments and to offset reduced spending by Baby Boomers who are nearing retirement."
According to the study, many CPG companies are looking to innovate by reaching consumers in more places or tailoring products for local customer tastes in emerging markets. Additionally, understanding customer priorities is central to innovation as consumers in the U.S. are buying more carefully, buying different pack sizes, taking advantage of volume discounts and trading down to non-premium brands.
The 2010 Financial Performance Report, released in July, is the 14th annual edition, compiled from interviews with senior leadership of GMA members (including members of the GMA CFO Committee), publicly reported company financial data, government statistics, analyst reports, and other published material on 152 companies in the food, beverage and consumer products sector.
"The CPG industry has a legacy of strong financial performance and resilience in the face of challenging economic times, and 2009 was no exception," said GMA president and CEO Pamela Bailey. "However, reigned-in consumer spending and continued fears about the future of the U.S. economy mean that companies will have to harness the innovation for which they are known as they look to grow sales."
The report found that establishing a foothold in emerging markets - especially in China, Russia, Brazil, India, and Southeast Asia - has taken on a sense of urgency for CPG makers as capital flows faster than ever and new competitors can ramp up quickly. The middle classes are growing and forming attachments to new brands and products just as fast. Consequently, product growth cycles in emerging markets have accelerated and the success or failure of a product launch or brand introduction now can be determined in a matter of just 12 or 18 months.
Additional key findings:
"These food, beverage, and household product companies are part of a true counter-cyclical industry, as it performs better than other industries during recessions, but tends to balance the scales with slower growth during expansions, as was the case in 2009," said Susan McPartlin, U.S. consumer packaged goods industry leader at PricewaterhouseCoopers.
To see additional report highlights, advance to page 2 of this article
Forging Ahead in the New Economy contains articles on the following key industry trends:
Category Management: Less Is More
Category management is best pursued through a partnership between manufacturers and retailers to understand consumer spending patterns and to set goals grounded in those insights.
Social Media: Raucous, Risky and Impossible to Ignore
Social media represents a massive opportunity for consumer businesses - if they can figure out how to discern useful patterns in the noise and mine this sea of sentiment and ideas.
Sustained Economic Growth: Jobs Hold the Key
CPG industry performance over the next several years will depend largely on two factors: increased consumer spending with a more stable economy and the ability to capitalize on new growth opportunities.
The Value-Added Tax Surfaces as a Debt Reduction Measure
Adopting VAT would put the US more in synch with other major industrialized countries, but it remains to be seen whether a VAT is politically viable in the near future.
A New Treatment for Leases
Sweeping accounting changes for the retail industry are likely to take place in 2012, affecting how companies record leases for retail/warehouse space and major equipment on their financial statements.
A No-Nonsense Approach to Environmental Sustainability
Corporations are taking a proactive stance by identifying and addressing the sustainability and climate change issues that impact their business models.
Greater Sustainability Disclosure on the Horizon
PwC analysis comparing the financial performance of CPG companies in various industries found that there are notable differences between the performance of companies who issue sustainability reports and those that do not.
Raising the Bar on Supply Chain Agility
Leaning and greening supply chains expands margins and funds growth, while providing greater value to consumers.
Indirect Costs: New Tactics for Extracting Waste
Judicious choices in the second round of cutting indirect spend will help companies become more agile by adjusting the rules of the past to align with future opportunities.
More Bang for the Trade Promotion Buck: Focus on Decision-Making Instead of Allocation
Companies are starting to make improved investment decisions during the promotional cycle (point-of-sale) rather than after, resulting in the need for trade promotion management to become trade decision making.
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