CPG Firms Expect Revenue to Rise: PricewaterhouseCoopers Study

NEW YORK - In spite of worries about the effect of skyrocketing energy costs, executives at U.S. consumer products companies are feeling positive about the future, anticipating that their revenue will grow over the next 12 months, according to PricewaterhouseCoopers' Retail & Consumer Industry Practice's Consumer Products Barometer, which was released yesterday.

The study said that 84 percent think the domestic economy is growing, compared with 75 percent last quarter. Executives expect average growth of 6.2 percent, the same as the previous quarter but still below the all-industries benchmark of 8.9 percent.

Still, higher energy costs were uppermost in respondents' minds, with 73 percent citing them as an obstacle to growth over the next year, vs. 65 percent who were concerned about them last quarter. Executives who felt rising oil/energy prices were potential barrier to growth were less optimistic about the economy, with smaller gross margins and fewer planned major new capital investments.

"Consumer products companies expect a fairly good year ahead, despite the energy squeeze," said John Maxwell, leader of PricewaterhouseCoopers' Retail & Consumer Industry Practice, in a statement. "While only a third of businesses have seemingly been able to pass on cost increases, the industry as a whole is looking forward to continued growth. If companies can find effective ways of dealing with rising energy prices, the industry will continue to create shareholder value."

In other study highlights, 79 percent of executives predicted widespread use of RFID tags within the next five years. In addition, 43 percent of companies surveyed are currently investigating the effectiveness and return on investment of RFID tags.

On the subject of private label, 45 percent of those polled said they manufacture private label brands for another reseller, while 43 percent contract with third-party manufacturers for production of their own company's branded products. Overall, private label brand production makes up 17 percent of surveyed companies' total manufacturing activities. Those making private label brands for others are much bigger than companies that manufacture their own branded products.

"Excess capacity is the likely reason behind the boom in private label business," explained Maxwell. "Many companies seek to fill their manufacturing capacity by taking on production for other consumer products businesses."

The Consumer Products Barometer is a survey comparing the views of 44 senior executives in the consumer products industry with an all-industries cross-section of 135 business leaders. Interviewing on the 2Q business climate was completed last month. PricewaterhouseCoopers provides industry-focused assurance, tax and advisory services to build public trust and enhance value for its clients and their stakeholders.
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