CPG Industry Maintains Strong Sales Growth: Report
U.S. consumer products manufacturers experienced a 10.6 percent sales growth this past year and delivered a relatively strong shareholder return of 7.3 percent in 2007, despite a challenging economic climate, according to The Food, Beverage and Consumer Products Industry: Achieving Superior Financial Performance in a Challenging Economy 2008, a report conducted by PricewaterhouseCoopers LLP (PwC) for the Grocery Manufacturers Association (GMA), Washington.
The report states that even in a difficult economy with ever-increasing commodities prices, agile consumer product companies can achieve growth by adopting successful practices in key strategic areas.
The report found that the aggregate market index, known as the CPG Market Weighted Index, closely tracked with the Dow Jones Industrial Average and S&P 500 for most of 2007 and was in line with the market for the first two years of the most recent three (2005-2007). Another key finding of the study is that while there is some exposure in sustainability reporting, in many cases, it can enhance a company's bottom line and shareholder value.
"The consumer products sector showed incredible resilience this past year in the face of a tough economy and we saw many companies using creative strategies to manage costs while delivering value to consumers," says Stephen Sibert, GMA senior vice president for industry affairs.
"However, we see this difficult environment as likely to continue, which means that consumer goods manufacturers and retailers will be confronting new challenges and they'll need to stay nimble and initiate more collaboration in order to continue their growth," says Sibert.
Large food companies attribute 45 percent to 55 percent of their products' price to raw material costs and the industry is not likely to see relief soon. The GMA-PwC study reveals how companies can harness the same forces driving up input costs to enhance financial performance.
"While there is no ‘one size fits all' solution to the economic challenges facing CPG makers, we believe our report highlights successful practices that any company can adopt to achieve superior performance," says John Maxwell, consumer packaged goods and retail industry leader for PricewaterhouseCoopers.
"CPG companies need to maintain their initiatives to expand in emerging markets but do so in a manner that effectively balances the opportunities for growth and cost management with the risk of sourcing from foreign markets and understanding local consumer preferences.
"Also, CPG companies need to collaborate with retailers in innovative ways to continue to provide value to the consumer. Finally, we learned that leading CPG companies recognize the value of sustainability reporting and in many cases, are being rewarded for it."