Slim Growth at Home, New Opportunities Abroad
The U.S. and world economies are several quarters into recovery after the deepest recession since World War II. The good news for CPG companies is that every major national economy—each a potential CPG marketplace—is growing, some more vigorously than others. World trade is seeing sustained recovery, though it will take time for the global economy to claw its way fully back to prosperity.
Climbing Out of the Economic Foxhole into a New Landscape
After Weathering “The Great Recession,” CPG Firms Must Look Beyond Mature North
As GMA and PricewaterhouseCoopers release the 2010 Financial Performance Report, Forging Ahead in the New Economy, it is clear that the CPG sector, long known for its counter-cyclical resilience, registered consistent, across-the-board performance in 2009.
Equally apparent, though, are the fault lines that have begun to appear in the North American consumer products firmament: decreasing U.S. household purchasing power, increasingly mature markets for core CPG products like soft drinks and snack foods, and splintering media and advertising markets that make CPG brand-building all the more challenging.
Furthermore, the baby boomers—those big spenders who came to the U.S. economy’s rescue time and again over the past two decades—are nearing retirement with depleted funds, reduced incomes, and fears of a double-dip recession. As Exhibit 1 shows, personal savings as a percentage of disposable income, while down from its peak of more than 5% in mid-2009, continues to run high by recent historical standards—a healthy development for imminent retirees and some U.S. households, perhaps, but hardly a harbinger of prosperity for CPG companies.
So where to find sales growth? Even as purchasing power in the U.S. stagnates, Asian consumers appear willing and able to open their wallets to an unprecedented degree. Incomes and domestic spending in emerging markets are on the rise, with data showing that consumers in these countries are buying more imported goods.Indeed, one striking irony of the recession is that it accelerated the rise of the middle classes in emerging markets. Savvy U.S. CPG companies have an historic, if perhaps limited window of opportunity to stake their claims in fast-growing emerging markets. We will talk more about those opportunities and possible limits later, but first, let’s start closer to home and see how U.S. CPG companies fared against the broader stock indices.
