Consumer packaged goods companies show resilience in recession

04-Jun-2009 - Last updated on 05-Jun-2009 at 09:34 GMT

The consumer packaged goods (CPG) industry in the US has shown resilience in the current recession and significantly outperformed the rest of the market in 2008, according to a report released this week.

The 2009 Financial Performance Report: Focusing on Today, Envisioning Tomorrow is the latest annual industry report by the Grocery Manufacturers Association (GMA) and PricewaterhouseCoopers (PwC), and was compiled from research, interviews and financial data on 157 companies in the food, beverage and consumer products sector.

CPG performance

While overall CPG company median shareholder returns for 2008 were down slightly more than 25 percent, this actually constituted a significantly better performance than the rest of the market, explained the research document. The food sector was the performance leader among the major CPG sectors, with 2008 median shareholder returns in down just 21 percent.

The study found that CPG food and beverages manufacturer sales grew by around 10 percent last year, down just slightly from 2007 median sales figures. The increase demonstrates the stable nature of the industry, said the report. The performance of the top quartile of the CPG companies was even more impressive with the average sales boost among this group reaching 18 percent.

The report concedes that while some of this growth was driven by record commodity prices in the middle of last year, it can also be attributed to a change in consumer patterns that showed a shift to lower-priced, value-orientated products.

Good news for packaging producers

The study will come as welcome news for packaging manufacturers who rely on demand from the food and beverage companies they supply.

“Given the CPG industry’s laser focus on delivering value, innovation and investment in the future, it’s no surprise that it appears to be weathering this economic cycle better than other sectors,” said GMA President and CEO Pamela Bailey.

Companies that have maintained their commitment to sustainable practices have also reaped the benefits with improved returns, the report said.

“CPG companies are not backing off of their sustainability initiatives,” said Bailey. “In fact, many view it as a differentiator and opportunity in the marketplace. The report shows that companies reporting on sustainability efforts have substantially outperformed companies that don’t.”

Stronger than ever

John Maxwell, consumer packaged goods and retail industry leader at PwC, said: “There are lessons to be learned from the CPG top performers, which are well positioned to emerge from this recession stronger than ever before, as they continue to invest in their core brands, take advantage of scale to produce healthy margins, and manage down debt.”

However, he cautioned that the CPG industry must avoid complacency and remain focused on purchasing trends as both individuals and industry players continue to be impacted by the liquidity crunch.

“There are opportunities for CPG industry companies that can capitalize on the trend of consumers focusing on product value within categories, on the move from eating out to eating in, and as consumers that have de-loaded the pantry begin to re-load".