The 250 largest consumer products companies grew 8.4%, nearly a 10% turnaround from the prior year's 1.2% decline, according to a new report by Deloitte, entitled ‘Global powers of the consumer products industry'.
The Deloitte report also finds that consumer product companies are seeking to establish footprints in higher growth emerging markets, amongst which, are the Middle East and Africa. According to the Deloitte report, the top 250 consumer product companies generated combined sales of more than US$2.82 trillion in 2010, a significant increase over 2009, when sales totalled US$2.57 trillion.
The report finds that Latin America led the regions in top-line sales growth with 22.2%, followed by North America, which experienced a rebound in composite sales, growing nearly 11% in 2010 from 3.2 percent in 2009. "Leaders in the space will continue to seek global growth opportunities and pursue business model innovations to win customers, consumers, and shoppers, while establishing more effective ways to manage uncertainty. Emerging markets, including the Middle East, will continue to be the engine of growth driven by an increasing middle class and domestic consumer demand," said James Babb, Clients and Industries leader, Deloitte Middle East. With 70 million new consumers projected to enter the global middle class each year, a majority being from emerging markets including the Middle East, the Deloitte report finds that countries within the developing world represent the largest opportunity for growth. However, meeting the lifestyle needs of these new consumers will require radical innovation in delivering the right products at price points that are typically well below the equivalent products in the developed world. Over the past two years, the consumer products industry has recovered from its 2008-2009 collapse as the Deloitte report indicates. Sales and earnings have been remarkably robust, despite continuing ongoing macro-economic uncertainty generated by political upheaval in the Middle East, the Eurozone Crisis and U.S. deficit concerns.
Other factors which also affected the downturn of sales in previous years are declining incomes, high unemployment rates and price-conscious consumers and suppliers. "2010 was a strong year for consumer products companies despite the continued volatility in the markets. One positive effect of slower global growth for consumer products companies will be the continued dampening of commodity prices," said Babb.
Moreover, in many of the slowing markets, a disproportionate share of the growth of consumer income is accruing to the relatively affluent. Hence, for companies targeting upscale consumers, the environment might not be so bad. For those targeting everyone else, the ability to offer low prices to uncertain consumers will be a clear competitive advantage," he added. According to the report, average sales volume for the Top 250 companies increased to US$11.3 billion in 2010 from US$10.3 billion in 2009. Among the top performing sectors were fashion and the tire industries.
The fashion goods sector posted the strongest composite sales growth in 2010 at 14.2 percent - a huge turnaround from a 5.3 percent drop in sales in 2009. In line with a rebound in auto sales, tire manufacturers made a significant comeback, with eight out of 10 tire manufacturers surveyed experiencing a double-digit growth in sales.