CPG Industry: Sales Growth In Challenging Economy
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."
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, New York.
"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, says Maxwell.
Warehouse Metrics Study Available From WERC
The annual benchmarking study of warehouse and distribution center performance, DC Measures 2008, has just been released by the Warehousing Education and Research Council (WERC), Oak Brook, IL. The study reports on 50 key operational metrics from data provided by WERC members.
The measurements have been grouped into five balanced sets (customer, operational, financial, capacity/quality and employee), plus two sets related to perfect order and cash-to-cash cycle measurement. Data from nearly 700 companies was used in the survey.
The use of the data across the entire supply chain was enhanced this year because WERC teamed with MESA (Manufacturing Enterprise Solutions Association) and MHIA (Material Handling Institute of America) to agree on standardized definitions.
The data was collected in 2008 about performance levels during 2007 but because it is part of an annual series, trends that take place over time are also illuminated. This year, the researchers noted:
• Improved ability of companies to deliver the Perfect Order;
• Executive support of measurement as a key practice;
• Introduction of cross organizational metrics to better measure overall performance vs. company solo performance.
"DC Measures 2008 gives managers the most current information available to compare their operation's performance with companies across a variety of industries, type of operations, size, customers served and business strategy," notes Robert L. Shaunnessey, WERC's executive director. "The study also shows key trends in terms of priorities and performance that can help managers plan and execute so they can stay competitive."
DC Measures 2008 is available for purchase at www.WERC.org. Retail price is $60. WERC members receive a free copy.