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    Demand Chain Investment Key to Growth: GMA-PwC US Report

    Food, beverage and household product sales all rose in 2011

    Top-performing companies in the food, beverage and household products sectors that leverage the demand chain will be in the best position to keep growing, according to Profitable Growth: Driving the Demand Chain, the 2012 Financial Performance Report by the Grocery Manufacturers Association (GMA) and PricewaterhouseCoopers LLC (PwC) US.

    Last year, both top- and bottom-performing companies experienced continued reviving sales growth. The food, beverage and household products sectors logged ongoing strong net sales growth of 9.5 percent, 10.5 percent and 7.5 percent, respectively.

    The report recommends that consumer packaged goods (CPG) companies and retailers invest in brands by leveraging the demand chain to better identify and meet consumer needs. Among the links in a typical CPG demand chain are 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 offers a breakdown of the CPG sector’s top-performing companies, and explores direct-to-consumer touchpoints, consumer demand for sustainable product and overseas expansion as ways to spur future growth.

    “Perhaps more so than in any other sector, CPG companies constantly monitor the temperature of the consumer,” noted Pamela G. Bailey, president and CEO of Washington, D.C.-based GMA. “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,” added Susan McPartlin, US leader, retail and consumer industry at New York-based 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.”

    Additional findings include:

    • Investment in brands and in long-term positioning remains a significant predictor of performance and is crucial to effective demand chain management.
    • For the first time since 2008, the bottom-performing group saw higher net sales growth.
    • Some top performers grew sustainability initiatives with the goal of reducing costs while driving growth by building consumer interest in socially and environmentally responsible products.
    • Retailers have a slightly better performance than manufacturers in 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 have, 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 kept investing heavily in emerging markets, with the aim of building trust among consumers.

    The report found that exports from CPG companies continue to rise as international markets offer greater growth opportunities. Emerging markets are still 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) nearly 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 mushroomed from $26 billion to $46 billion) and emerging economies (which grew from $14 billion to $34 billion).

    “There have been positive economic developments over the past year that paint a more promising picture,” noted Lisa Feigen Dugal, PwC’s North American advisory leader, retail and consumer industry. “But while market risks persist, CPG companies need to stay nimble, informed, and be adaptive in a higher-risk environment that brings unanticipated events. 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 [that] could represent fundamental changes to the tax, regulatory and operating environments.”

    Now in its 16th year, the GMA-PwC Financial Performance Report provides analyses based on public information from 142 companies in the food, beverage and consumer products sectors, in addition to 67 retailers.

    Profitable Growth: Driving the Demand Chain will be presented via webcast by PwC and GMA on Monday, June 25 at 1:30 p.m. EDT, and an electronic copy of the complete report is available online.

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