Top-performing companies in the food, beverage and household products sectors who leverage the demand chain will be in the best position to continue to grow, according to the 2012 Financial Performance Report by the Grocery Manufacturers Association (GMA) and PwC: “Profitable Growth: Driving the Demand Chain.”
The GMA-PwC Financial Performance Report includes analyses based on public information from 142 companies in the food, beverage and consumer products sectors as well as 67 retailers. In 2011, both top- and bottom-performing companies saw their sales growth continue to revive. The food, beverage and household products sectors each showed continued strong net sales growth of 9.5 percent, 10.5 percent and 7.5 percent respectively.
“Perhaps more so than in any other sector, CPG companies constantly monitor the temperature of the consumer,” said Pamela G. Bailey, President and Chief Executive Officer, GMA. “Consumer demand moves so fast—only those with fast, nimble and cost-effective supply and demand chains will be able to keep pace.”
According to the report, CPG companies and retailers should invest in brands by leveraging the demand chain to better identify and meet consumer demand. The links in a typical CPG demand chain might include front-end sales; marketing; customer service; trade promotions; brick-and-mortar retail partners; online retailers; social media sites; and reverse logistics or end-of-product-life recycling. The report includes a breakdown of the CPG sector’s top-performing companies, explores direct-to-consumer touch points, consumer demand for sustainable product and overseas expansion as a way to fuel future growth.
“CPG companies who shift new strategic investments to their demand chain will stand the best chance of creating new growth,” said Susan McPartlin, U.S. Leader of the Retail and Consumer Industry for PwC. “The series of activities that sparks and maintains a brand—the demand chain—should be just as integral a part of strategic decisions as are operations and the supply chain.”
Other key report findings cite that:
- Investment in brands and in long-term positioning remains a significant predictor of performance and is critical to effective demand chain management
- For the first time since 2008, the bottom performing group enjoyed higher net sales growth
- Some top performers expanded sustainability initiatives with an eye towards cutting costs while driving growth by building consumer interest in socially and environmentally responsible product
- Retailers have a slightly better performance than manufacturers with regard to shareholder returns: 10.3 percent versus 8.7 percent
- Over the past five years, top-performing companies have spent more on defending their market share than bottom performing companies, as measured by strategic median selling, general and administrative (SG&A) spending relative to sales
- Strong liquidity continues to give top performing companies more options to invest in R&D, innovation and acquisitions
- Many top performers have continued to invest heavily in emerging markets, with the goal of building trust among consumers
Added market opportunities
Exports from CPG companies continue to rise as international markets present greater growth opportunities. Emerging markets remain the most promising source of economic growth as the expanding middle class consumes more, with U.S. exports of CPG products to the largest emerging nation purchasers (China/Hong Kong, Taiwan, South Korea and the Philippines) almost tripling between 2005 and 2011—from $5 billion to $13 billion. Between 2005 and 2011, total exports of CPG products essentially doubled, from $40.3 billion to $80.3 billion. The $40 billion increase was split evenly between traditional export markets (the European Union, Canada, Japan and Mexico increased from $26 billion to $46 billion) and emerging economies (which increased from $14 billion to $34 billion).