Executive Update

GMA – PwC Financial Performance Report: Demonstrate Resilience with Positive Net Sales Growth

Retailers and consumer packaged goods (CPG) companies are dealing with new rules of consumer engagement as they seize opportunities from advanced technology and the digitally connected consumer, according to the 2013 Financial Performance Report by the Grocery Manufacturers Association (GMA) and PwC US, titled Growth Strategies: Unlocking the Power of the Consumer. Despite the overall slowing of net sales growth rates in 2012, the report notes that food, beverage and household products companies experienced positive net sales growth of 7.0 percent, 5.5 percent and 3.2 percent, respectively.

 “This report shows that in the midst of a challenging economy, the food, beverage and consumer products industry continues to show great resiliency,” said Pamela G. Bailey.  “By providing consumers with innovative products and convenient, cutting-edge shopping experiences, CPG companies are well positioned to enhance consumer loyalty and profitability.”

CPG companies have developed digital channels to interact with consumers, and have implemented direct-to-consumer processes. This combined with the increase in consumers buying their products online from the brands that they already know and trust gives CPG businesses a competitive edge and allows them extensive opportunities for growth. Direct-to-consumer is a potent vehicle for testing new products and reaching out to new consumers faster and more effectively than ever before. In 2013, more than 40 percent of CPG companies expect to sell products directly to consumers.

Now in its 17th year, the GMA-PwC Financial Performance Report includes analyses based on public information from 144 companies in the food, beverage and consumer products sectors as well as from 69 retailers.

Among the key findings of the report:

  • Total retail sales reached $1.1 trillion in 2012: $568 billion at grocery stores and $530 billion at food service and drinking establishments.
  • While net sales had been slowly going up since the recession, both top-and bottom-performing CPG companies experienced a slowdown in net sales growth in 2012.
  • Bottom performers are starting to hold onto their cash, which means they could be ready to start making more investments in research and development (R&D) and marketing to launch new products.
  • Many companies are embracing the need for product innovation as well as understanding consumer and market needs as part of their R&D activities.
  • One of the key issues faced by food manufacturers during 2012 was the continued rise of commodity prices as there is a growing gap between prices companies pay for raw materials and the prices they can charge for finished goods.
  • The food sector benefited from higher sales per employee while remaining flat on inventory turnover and cash conversion cycle, while the beverage sector also posted a strong performance, with return on sales continuing a steady upward pace. The household products sector experienced better results in 2012, with also a greater increase on return on sales.

For an electronic copy of the complete report, visit: www.pwc.com/us/retailandconsumer or www.gmaonline.org.