Food and beverage industry executives expect to see improved revenue and profitability this year and next, but continue to feel hamstrung by unemployment conditions and slow consumer spending, according to a new survey from KPMG LLP, an audit, tax and advisory firm.
Driving improvements in the industry, the survey said, will be product innovations and new marketing efforts, especially those using online and mobile technologies.
Consistent with New York-based KPMG’s results from this time last year, the majority of food and beverage executives, about 59 percent, expect their sector to recover ahead of the U.S. economy as a whole. However, respondents said they now believe the timeline for a full U.S. economic recovery, on average, is 2.2 years away, or in June 2012. In last year’s survey, executives estimated 1.9 years for a U.S. economic recovery.
Still, about two-thirds of executives said their revenue and profitability were better now than a year ago, in marked contrast to KPMG’s survey last summer, when less than one-third thought these business measures had improved over the year before.
“While there is an uptick in the level of optimism this year from the food and beverage execs, they are pushing their recovery outlook even further out from last year’s predictions,” said Patrick Dolan, KPMG’s national line of business leader for consumer markets and U.S. sector leader for food, drink and consumer goods. “These results illustrate that the economy will most likely not recover as rapidly as hoped, placing additional emphasis on food and beverage companies to continue to employ strategies to manage costs and improve productivity.”
The KPMG survey was conducted during April and May and reflects the responses of 61 chief executives and other C-suite executives in the food and beverage industry. About 21 percent of respondents work for food and beverage companies with annual revenue exceeding $1 billion; 46 percent represent companies with annual revenue between $250 million and $1 billion; and 32 percent represent companies with annual revenue below $250 million. Clarion Research Inc. conducted the survey and compiled the data.
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Biggest drivers of company revenue growth during the next 1-3 years
Source: KPMG LLC
Executives in the KPMG survey said factors most likely to hinder economic recovery in their sector include continuing high national unemployment, 64 percent of respondents; decreased consumer confidence, 49 percent; and increased government regulation, 34 percent.
When asked about the industry’s largest challenges, 46 percent of respondents cited discounts driven by market competition, while 11 percent said the recognizing and responding to customer needs or trends.
About 39 percent of respondents believed the increased use of mobile technology by consumers would most positively impact sector recovery, followed by increased online shopping, 34 percent, and increased outsourcing of technical/business procedures, 28 percent.
KPMG's other survey findings included:
Nearly half of the executives (49 percent) say their company’s ability to get financing and raise capital has improved in the past six months, with 44 percent saying it has stayed the same, and 7 percent claiming it has gotten worse.
When asked about their company’s global expansion efforts, 43 percent of respondents said they have already expanded into emerging markets. Of those that have already entered emerging markets, the regions cited most often were Latin America (25 percent), China (23 percent) and Brazil (18 percent).
The KPMG survey also asked food and beverage executives to indicate if their strategic focus was now on investing for growth or cutting costs. Almost two-thirds, or 61 percent, chose the investment option, but 39 percent said they were still focused on cost cutting.
Contact Sarah E. Lockyer at [email protected].