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Home » Demand Chain Investment "Key to Continuing Growth" in Food + Beverage, Household Goods

Demand Chain Investment "Key to Continuing Growth" in Food + Beverage, Household Goods

June 22, 2012
Grocery Manufacturers Association

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.

According to the report, consumer packaged goods (CPG) companies and retailers should invest in brands by leveraging the demand chain to better identify and meet consumer needs. The links in a typical CPG demand chain can 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.

"Perhaps more so than in any other sector, CPG companies constantly monitor the temperature of the consumer," said GMA President and CEO Pamela G. Bailey. "Consumer demand moves so fast, only those with fast, nimble and cost-effective supply and demand chains will be able to keep pace."

"CPG companies that shift new strategic investments to their demand chain will stand the best chance of creating new growth," said Susan McPartlin, PwC's US leader, retail and consumer industry. "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."

Now in its 16th year, 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.

Among the key findings:

• 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 vs. 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.

According to the report, 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 $5bn to $13bn. Between 2005 and 2011, total exports of CPG products essentially doubled, from $40.3bn to $80.3bn. The $40bn increase was split evenly between traditional export markets (the European Union, Canada, Japan, and Mexico increased from $26bn to $46bn) and emerging economies (which increased from $14bn to $34bn).

"There have been positive economic developments over the past year that paint a more promising picture. But while market risks persist, CPG companies need to stay nimble, informed, and be adaptive in a higher-risk environment that brings unanticipated events," added Lisa Feigen Dugal, PwC's North American advisory leader, retail and consumer industry. "Three factors that CPG executives need to consider include: continued commodity price volatility, how emerging markets - despite the growth opportunities - bring the uncertainties of developing economies, and new government policies could represent fundamental changes to the tax, regulatory and operating environments."

To download the report, visit PWC or GMA.

Source: Grocery Manufacturers Association

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Business Strategy Alignment Global Supply Chain Management Consumer Packaged Goods Food & Beverage
KEYWORDS Business Strategy Alignment consumer packaged goods Food and Beverage Global Supply Chain Management metrics in food & beverage industry retail supply chain Supply Chain Management Value chain
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