Food industry executives expect to see increased profitability in the sector this year, although many think it may be difficult to sustain, according to a new survey from KPMG International.
The poll of industry executives from audit, tax and advisory firm KPMG found that of the 138 senior food and beverage industry executives surveyed, 30 percent have already seen a ‘sustained increase’ in consumer demand for their products and services since the recession, and a further 44 percent expect demand to pick up in 2011. Twenty percent said they expect to see demand increase in 2012 or later.
In terms of financial performance, only 11 percent said they expect financial performance to decline this year, while 58 percent expect ‘some increase’ and 20 percent expect ‘significant increases’.
Global chair of KPMG's consumer markets practice Willy Kruh said: "These senior financial executives are expressing cautious optimism, but we remain in a state of flux. 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."
Increasing market share
Patrick Dolan, KPMG LLP national line of business leader, consumer markets and US sector leader, food, drink and consumer goods, said that most food and beverage companies are likely to push organic growth in the coming year, particularly in emerging markets, rather than focus on increasing mergers and acquisitions.
He said that executives are predicting more “tepid growth” in financial performance this year but are more optimistic about increasing market share.
"US finance execs don't feel an enormous lift from the recovery and have their work cut out in building a growth platform and taking their businesses forward,” Dolan said. “To remain competitive, they intend to focus on their core markets and look to Asia and Latin America for growth.”
In order to expand into emerging markets, 39 percent of respondents said they intend to add distribution channels, including online, 37 percent said they would pursue mergers and acquisitions, and 29 percent said they intend to open new stores.
Domestically, 57 percent of industry executives surveyed said they intend to grow organically, 16 percent said they intend to grow primarily through mergers and acquisitions, and 22 percent said they would pursue a combination strategy of organic and M&A growth.