Report: CPG Companies Should Focus on Innovation

SN STAFF

WASHINGTON — CPG companies should buck recessionary tactics like divesting non-core brands, conserving cash and cutting costs, and focus on innovation to encourage household spending and grow revenue, advises “Forging Ahead in the New Economy,” a 2010 Financial Performance Report from the Grocery Manufacturers Association and PricewaterhouseCoopers.

It found that many CPG companies are looking to innovate by reaching consumers in more places or tailoring products to local tastes in emerging markets. Understanding customer priorities is central to innovation as consumers buy more carefully, buy different pack sizes, take advantage of volume discounts and trade down to non-premium brands.

“The CPG industry has a legacy of strong financial performance and resilience in the face of challenging economic times, and 2009 was no exception,” said Pam Bailey, president and chief executive officer, GMA, in a statement. “However, restrained consumer spending and continued fear about the future of the U.S. economy mean that companies will have to harness the innovation for which they are known as they look to grow sales.”

Suppliers are also racing to gain a foothold in emerging markets like China, Russia, Brazil, India and Southeast Asia, according to the report.

It was compiled from interviews with senior leadership of GMA members, publicly reported company financial data, government statistics, analyst reports and other published material on 152 companies in the food, beverage and consumer products sector.