Innovation or cost cutting to drive profits

July 21, 2010

Senior executives in the food and beverage industry expect to see revenue and profitability improve for the rest of this year and next, and also expect the industry to recover ahead of the overall U.S. economy, according to a KPMG survey of 61 executives conducted in April and May. But they also believe the economic recovery is further off - sometime in 2012, reports Marketing Daily.

Senior executives in the food and beverage industry expect to see revenue and profitability improve for the rest of this year and next, and also expect the industry to recover ahead of the overall U.S. economy, according to a KPMG survey of 61 executives conducted in April and May. But they also believe the economic recovery is further off - sometime in 2012, reports Marketing Daily. About two-thirds of executives reported that revenue and profitability have improved in comparison with a year ago -- a marked improvement over last summer's survey, when fewer than a third reported that these measures were up versus the previous year. In addition, 51 percent said they expect to increase employee headcount this year, although by just 1 percent to 3 percent. (Just under one-quarter expects to have to cut headcount, and 26 percent expect no change.)


The most pressing immediate concerns are discounts driven by market competition (46 percent), followed by recognizing/responding to customer needs/trends (11 percent) and growth of private label (11 percent).


Asked to name the biggest drivers of their companies' revenue growth over the next one to three years, 89 percent cited product innovations and innovative merchandising strategies (82 percent). In line with last year's results, nearly 61 percent) said their strategic focus is on investing for growth. Then again, 39 percent are still focused on cost cutting. Notably, specific factors or tactics they see as potentially enhancing the recovery of the industry, 39 percent cited consumers' increased mobile use of the Internet, increased online shopping (34 percent), and increased outsourcing of technical/business procedures (28 percent). And given the huge growth potential in emerging markets

in contrast to the relative stagnation domestically, 43 percent report their companies have already expanded into emerging markets. Among these, the regions most cited were Latin America (25 percent), China (23 percent) and Brazil (18 percent).

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