Meager or non-existent growth, price increases reduced to a crawl in a non-inflationary context, deteriorating margins and competitive pressure from e-commerce’s expanding hold on everyday produce distribution paint a dismal outlook
Dropping at Procter & Gamble – 2%, prices remained mostly unchanged at Unilever +0.1% and Nestlé +0.2% for the first quarter '18
By pushing volume at Unilever +3.4%, Nestlé +2.8% and Procter & Gamble +2.0%, the firms protected sales, a temporary fix detrimental to margins
But with organic growth slowing to the lowest rate since 20 years in the key US market, a strategy relying on promotions, strong presence in big store networks and marketing of new – more profitable – product lines is being called into question
Fickle consumer tastes benefiting local produce, organic food, recognition of small brands and the human touch could well be short hand for downsizing the high volume and uniformly distributed product lines of yesterday’s globalized world
This hackneyed argument may be correct but, assuming the food and personal care conglomerates are indeed engaged in a rearguard battle with consumers questioning their every move, the competition with e-commerce is only starting to heat up
Making a difficult situation worse, Amazon is well positioned at both ends of the new consumer pattern – selling everyday basics at low prices (think diapers and toilet paper) and finding itself in a sweet spot to promote small brands in the disruptive ‘long tail’ of merchandising
How the consumer goods industry responds to the challenge will be an on-going discussion on pininvest.com