Chicago: The 10th annual Grocery Manufacturers Association/Food Products Association (GMA/FPA) “Financial Performance Report,” demonstrates that the consumer packaged goods (CPG) industry is making a significant contribution to the U.S. economy.
The report, compiled for GMA/FPA by PricewaterhouseCoopers, details an estimated $2.1 trillion of revenues and more than $1 trillion worth of value added to the overall U.S. economy.
“This report captures the vast economic power and impact of the food, beverage and consumer packaged goods (CPG) industry,” says Stephen Sibert, GMA group vice president for industry affairs and membership. “The measures highlighted by PwC, show that the CPG industry helps drive and sustain the economy, and returns significant value to consumers, investors and trading partners.”
To further demonstrate the substantial effect of the CPG industry on the nation’s economy, PwC found that overall CPG industry growth remains above 5 percent and overall productivity is on the rise. In 2004, CPG manufacturers employed 14.7 million Americans and contributed $2.1 trillion to the economy. In turn, employees were compensated $569 billion and manufacturers paid $242 billion in tax revenue.
“The impact of the CPG industry on the economy is not only increasing, but its recent growth rate has matched that of the overall U.S. economy,” says John Maxwell, partner and global consumer packaged goods industry leader for PricewaterhouseCoopers. “The CPG industry clearly exerts an influence far beyond supermarket shelves and household kitchens.”
The report also notes that slow population growth, discerning consumers and an environment in which it has been difficult to raise prices have created an intense business climate for the CPG industry. Issues such as rising commodity and energy costs, changing consumption patterns, globalization and supply chain complexity are just a few of the trends affecting the CPG industry.
Throughout the 1990s, CPG companies focused on achieving internal productivity gains, but the report indicates that today CPG companies are implementing targeted collaboration across the value chain to remain competitive.
“The most successful CPG companies are devising new strategies for growth by incorporating a greater degree of openness in their business models,” says Lisa Dugal, partner and North American retail and consumer packaged goods advisory leader for PricewaterhouseCoopers. “The boundaries between retail and CPG manufacturing are blurring. Some in the industry are developing a total experience for their consumers and forging partnerships with companies outside their core business.”
Some of the other trends responsible for shaping the CPG industry analyzed in this year’s study include an increase in private-label products, the need for continual product portfolio management, rising input costs and stakeholder demands.
Another emerging trend involves expanding consumer markets, such as Asia and central and eastern Europe. Consumer spending in these areas is on the rise, yet CPG companies must confront wide income inequalities in these countries. More than 4 billion potential customers in these markets live on less than $2 a day. Making healthy, clean products affordable to these customers is changing the way CPG products are produced and distributed.