Recession-toughened consumer companies demonstrate resilience to the
global impact of events in Japan and Middle East
Increase in consumer base and growing middle class in emerging markets
expected to stimulate consumer demand and spending
In North America, cautious outlook as production and merchandise costs
remain a focus; flat spending expected for Europe
TORONTO, May 3 /CNW/ - Consumer companies around the globe are showing a
surprising resilience and guarded optimism about prospects for growth
in 2011, even amid continued market volatility and changing demographic
trends, according to a new survey from KPMG International.
"An element of cautious optimism is evident but we remain in a state of
flux," said Willy Kruh, Global Chair of KPMG's Consumer Markets
practice. "We're still experiencing an erosion of spending as people
are simply spending less, so the focus on cost management going forward
is still critical.
"Moreover, the fundamental issues underlying Standard and Poor's revised
outlook on the US as well as the threat of rising inflation in China
could have repercussions on consumer spending in both North America and
China, although it's still too soon to tell."
Three-quarters of the consumer executives surveyed report that they
anticipate an increase in consumer spending in their target markets and
in their own companies' financial performance in 2011 compared to 2010.
"The management discipline that consumer businesses adopted throughout
the downturn made many of them leaner and more efficient, creating a
stronger base from which to pursue success," Mr. Kruh said.
Sixty-four percent believe that the ongoing situations in Japan and the
Middle East will have little or no impact on their business operations
in the long-term, although for
Asia Pacific specifically, 80 percent of all respondents expect a
sustained impact on economic growth over the next six to 12 months.
Respondents worldwide were most likely to see energy price volatility
as the most enduring impact of these crises, as 51 percent of
respondents anticipate a short-term impact on energy price volatility
and 40 percent see a long-term impact.
For the study, CFO Insights: A global survey of Consumer Markets executives (http://www.kpmg.com/Global/en/IssuesAndInsights/ArticlesPublications/Pages/cfo-insights-global-survey.aspx), KPMG International worked with CFO Research Services to survey 291
senior finance executives of consumer businesses to solicit and examine
their outlook on the issues affecting their industries and market
segments. Shortly following the crises in Japan and the Middle East,
KPMG and CFO Research conducted a second survey of more than 150 of
senior finance executives in consumer businesses to gauge their outlook
on the impact that these events would have on their businesses and
An Eye on Cost and Growth
While the economic downturn has had a significant impact on profits and
growth for many consumer businesses over the last three years, those
companies that have sustained the downturn have emerged stronger:
nearly 50 percent of executives say they have better cost structures,
prospects for growth and improved relationships with suppliers.
"We're witnessing the beginnings of a cost-to-growth agenda in the
consumer sector," said Mark Larson, KPMG's Global Head of Retail.
"We're moving into a new paradigm characterized by a renewed focus on
growth, while preserving margins and investing in IT. The sector has
learned the hard way that it can't take its eye off the ball of cost
Seventy-five percent of respondents worldwide expect a rise in consumer
spending in 2011 compared to 2010. Elsewhere in the survey,
respondents were especially likely to identify emerging markets such as
Asia, India, and Latin American as strong regions for growth and that
the growing consumer base and expanding middle class in emerging
markets—as well as consumers' adoption of technology—will have a
positive impact on their businesses.
In North America and Europe, however, outlooks are more measured.
Consumer trends in these regions point to a stronger consumer focus on
savings; a heightened interest in safety, health and sustainability;
lower consumption of luxury goods, and an aging population.
Over 40 percent said that maintaining profit margins will be a challenge
due to rising input costs, discounting, regulatory compliance and
foreign exchange variability. Moreover, 60 percent believe that they
will have difficulty raising prices.
Careful Positioning for Growth
A majority of respondents say they will increase market share mainly
through organic growth: 74 percent plan to enter new geographic markets
-through opening new stores, adding distribution channels, or other
Respondents from the US and Canada intend to employ organic growth
methods as their primary tool for increasing market share. Executives
from Asia-Pacific, Latin America and Europe say they will also pursue
organic strategies but will supplement their growth with M&As.
And in a global economy where volatility may be the new norm -
economically, environmentally and politically - 42 percent of
respondents, when polled about the impact of the Middle East and Japan
crises say they will most likely address changes to their risk
management policies, and 40 percent intend to adjust their supplier
Improvements in supply chain efficiency are critical to growth
strategies with over 50 percent of respondents intending to improve
distribution structure, invest in technology, decrease inventory and
Information technology (IT) investment also plays a significant role in
both cost and strategic growth initiatives. Over 70 percent of
respondents say their companies will invest in IT systems for customer
relationship management, enterprise resource planning, business
intelligence and forecasting.
"In the face of such volatile market conditions--continuing economic
risks compounded by the impact of other social and environmental
trends--retailers and manufacturers will need to consider how they can
develop contingency plans and adapt their operations and strategies to
quickly respond to these dramatic changes."
SOURCE KPMG International Cooperative
For further information:
Head of External Communications
+1 416 777 8491
Vice President and Director of Research
CFO Publishing LLC