WASHINGTON, June 9, 2008 (PRIME NEWSWIRE) -- U.S. consumer products manufacturers experienced a 10.6 percent sales growth this past year and delivered a relatively strong shareholder return of 7.3 percent in 2007, despite a challenging economic climate, according to The Food, Beverage and Consumer Products Industry: Achieving Superior Financial Performance in a Challenging Economy 2008, a report conducted by PricewaterhouseCoopers LLP (PwC) for the Grocery Manufacturers Association (GMA). Released today, the report states that even in a difficult economy with ever-increasing commodities prices, agile consumer product companies can achieve growth by adopting successful practices in key strategic areas.
The report found that the aggregate market index, known as the CPG Market Weighted Index, closely tracked with the Dow Jones Industrial Average and S&P 500 for most of 2007 and was in line with the market for the first two years of the most recent three (2005-2007). Another key finding of the study is that while there is some exposure in sustainability reporting, in many cases, it can enhance a company's bottom line and shareholder value.
"The consumer products sector showed incredible resilience this past year in the face of a tough economy, and we saw many companies using creative strategies to manage costs while delivering value to consumers," said Stephen Sibert, GMA senior vice president for industry affairs. "However, we see this difficult environment as likely to continue, which means that consumer goods manufacturers and retailers will be confronting new challenges, and they'll need to stay nimble and initiate more collaboration in order to continue their growth."
Large food companies attribute 45 percent to 55 percent of their products' price to raw material costs, and the industry is not likely to see relief soon. The GMA-PwC study reveals how companies can harness the same forces driving up input costs to enhance financial performance.
"While there is no 'one size fits all' solution to the economic challenges facing CPG makers, we believe our report highlights successful practices that any company can adopt to achieve superior performance," said John Maxwell, consumer packaged goods and retail industry leader for PricewaterhouseCoopers. "CPG companies need to maintain their initiatives to expand in emerging markets but do so in a manner that effectively balances the opportunities for growth and cost management with the risk of sourcing from foreign markets and understanding local consumer preferences. Also, CPG companies need to collaborate with retailers in innovative ways to continue to provide value to the consumer. Finally, we learned that leading CPG companies recognize the value of sustainability reporting and in many cases, are being rewarded for it."
Commenting on the sector's financial performance, Herb Walter, consumer packaged goods and retail advisory partner at PricewaterhouseCoopers said, "In 2007, we saw CPG manufacturers outperform the Dow and S&P averages on strong financial performance, including a median EBIT growth rate of 15+ percent. Free cash flow was seven percent of sales, and with a significantly reduced cash conversion cycle, capital has been freed for product innovation and marketing, among other spending initiatives."
"A particularly exciting finding of this year's report was the strong effect that sustainability reporting can have on corporate value," said Lisa Feigen Dugal, the North American consumer packaged goods and retail advisory leader for PricewaterhouseCoopers. "It's well known that sustainability initiatives can be a great brand and reputation enhancer, but now we've discovered they're much more. Positive reporting on these initiatives can enhance a company's bottom line and shareholder value."
The Food, Beverage, and Consumer Products Industry: Achieving Superior Financial Performance in a Challenging Economy 2008 will be presented via webcast by PricewaterhouseCoopers and GMA on June 10, 2008 at 11:00 a.m. EDT (click here for registration information: http://www.meetpwc.com/GMAPwCWebcast). For an electronic copy of the complete report, visit www.pwc.com/us/retailandconsumer or www.gmabrands.com/publications/index.cfm.
Additional Report Highlights
Global Growth Opportunities: Balancing the Risk
As more companies expand globally, this report takes a fresh look at the risks -- and discusses successful practices for managing them effectively and turning them into opportunities.
Best Practices in Sustainability Reporting
Sustainability is becoming a business imperative that can boost corporate value, and more companies can reap the rewards of being accountable for sustainability initiatives.
A Simple Plan: Making Indirect Taxes Visible, Manageable and Measurable
The report covers how companies can plug the indirect tax drain with a change of mindset and better planning.
Increasing Value & Managing Costs through Joint Manufacturer/Retailer Efforts
The report shares the finding that creative collaboration can be a win-win-win proposition for CPG manufacturers, retailers and consumers.
Additional Insights into the Retailer Landscape
The report offers insight into how retailers can rethink their approach to international markets, respond more effectively to trends and collaborate with their suppliers, in an unprecedented economic environment.
About the Grocery Manufacturers Association
The Grocery Manufacturers Association (GMA) represents the world's leading food, beverage and consumer products companies. The Association promotes sound public policy, champions initiatives that increase productivity and growth and helps to protect the safety and security of the food supply through scientific excellence. The GMA board of directors is comprised of chief executive officers from the Association's member companies. The $2.1 trillion food, beverage and consumer packaged goods industry employs 14 million workers, and contributes over $1 trillion in added value to the nation's economy. For more information, visit the GMA Web site at www.gmaonline.org.
About PricewaterhouseCoopers
PricewaterhouseCoopers (www.pwc.com) provides industry-focused assurance, tax and advisory services to build public trust and enhance value for its clients and their stakeholders. More than 146,000 people in 150 countries across our network share their thinking, experience and solutions to develop fresh perspectives and practical advice.
"PricewaterhouseCoopers" refers to PricewaterhouseCoopers LLP or, as the context requires, the PricewaterhouseCoopers global network or other member firms of the network, each of which is a separate and independent legal entity.