United States

McGladrey Survey: Consumer Products Executives Cautiously Optimistic About Growth

NEWS RELEASE

CHICAGO,

Two-thirds of consumer products company executives expect to see increased revenue and profits over the next year, according to data from the 2014 McGladrey Manufacturing and Distribution Monitor. The Monitor, which was conducted by McGladrey LLP, the leading provider of assurance, tax and consulting services focused on the middle market, includes responses from more than 900 executives at small and mid-size U.S. manufacturers and distributors, including 180 executives at companies across the consumer products supply chain. The survey provides an annual update on the state of middle market companies in consumer products sector.

According to the survey, nearly three quarters (75 percent) of consumer products companies saw sales growth over the past year, with an average increase of 7.5 percent. But the 2014 Monitor suggests that the future is even brighter as 70 percent of executives expect an increase in domestic demand for their products over the coming year. In this year's survey, 88 percent of consumer products executives reported expecting domestic sales increases over the coming year, with an average increase of 8.4 percent. These companies are also expecting good news abroad: More than half (51 percent) expect international sales to go up in the next twelve months, with an average expected increase of nine percent. 

"After years of watching consumer confidence and demand move along at a frustrating stop-and-start pace, executives across the consumer products supply chain are looking at a bright future," said Carol Lapidus, consumer products national leader for McGladrey. "They see solid demand in the coming year, and a majority believe consumer confidence will once again be a boon for their businesses, not an impediment. We are at a pivotal point in the consumer products industry. The combination of economic improvement, growth of branded products, maturation of Omni-channel and increased available investment dollars will enable smart consumer products companies to grow at an accelerated rate."

Amid the optimism, M&A is one area that appears particularly primed for activity, with one-fifth of companies reporting they have plans to acquire a company in the same business, and 19 percent reporting plans to acquire in a complimentary business. This trend is expected to be even more prevalent among food and beverage manufacturers and distributors, a quarter (25 percent) of whom reported plans to purchase a company in their own industry over the next twelve months.

However, growth will not only come from M&A. After years of cost cutting, executives are looking at the next 12 months as an opportunity to make long-term investments and acquisitions they need to build their companies, and most importantly, increase their product offerings. Internal investments are also set to soar, as executives seek ways to increase product offerings by building larger, recession-resilient organizations focused on innovation, new products, best practices and growth. Sixty-two percent expect to increase their investments in equipment and machinery, while nearly half (49 percent) plan to invest more in facilities. Technology appears to be the focus of the near future, with more than three quarters (76 percent) predicting an average increase in technology investment of nine percent. Seventy-seven percent of respondents plan to increase the amount they spend on marketing over the coming year, with the majority (81 percent) of those dollars going toward social and online media. These investments are part of a more general effort to increase corporate engagement through social media, utilize customer data in a meaningful way that helps build business, and improve security at a time when the threat of data breaches continues to grow.

This focus on innovation and new products is particularly prevalent among food and beverage companies. Approximately 66 percent of food and beverage executives said they will expand their customer bases with new brand, sub-brand (separate, but complementary brands that tailor a product to a particular market sector or niche) or private label products to maintain or grow sales and margins. In addition, one-half of executives say new products and line extensions are important for their companies' sales growth. Innovation is key to new product development, as well, with 62 percent surveyed saying they will create new products to address the hungry consumer market.

"Consumer products companies have been waiting for a period of strong and consistent growth, and now that we appear to be there, they are making the changes and enhancements they need to stay competitive, and to grow in a competitive environment marked by evolving and complicated consumer demands," said Cristin Singer, national leader of McGladrey's food and beverage industry practice. "Food and beverage companies' focus on new product innovation is a perfect example of this. We have seen more and more companies aligning their innovation efforts, in collaboration with their customers, to meet consumer demands, including creating more healthy and natural products, and developing new flavors and formulations."

Despite the positive outlook, the survey also makes clear that consumer products executives remain troubled by a number of potential impediments to their companies' continued growth. Executives are struggling to untangle a knot of regulations and taxes that could limit profits. These include the impact of the Affordable Care Act, which was reported as a potential limitation on growth by 66 percent of executives. They are also closely watching state action and regulatory activity on product safety, with just under half (44 percent) expecting that state regulation will limit their companies' growth over the next 12 months. Out of the policy arena, they also face rising prices for purchases, transportation and energy that often outpace inflation. In fact, more 80 percent of executives expect an average increase of more than four percent in costs for both transportation fuels and utilities in the coming year.

"While the outlook is decidedly positive, there is no such thing as a risk-free environment, especially not in this economic recovery process. Executives' optimism is understandably tempered by a number of issues. In some ways, the recovery itself continues to be a question, as many doubt we are growing at a pace that can support the kind of growth companies expect after a period like the last few years," said Lapidus. "The picture is further complicated by an uncertain and gridlocked political climate that has shown no signs of improving over the last couple of years, making the impact of already-tough items such as tax policy, the Affordable Care Act, and online sales tax legislation even more difficult to plan for."

About the McGladrey Manufacturing and Distribution Monitor
The McGladrey Manufacturing and Distribution Monitor surveys industry leaders to assess the current state of the industry and to determine what steps CEOs, CFOs and other executives are taking to grow their businesses and stay competitive. All data is collected online in response to invitations from McGladrey and from partnering associations and chambers of commerce across the United States.

About McGladrey
Effective Oct. 26, 2015, McGladrey will unite with fellow members of our global network under the common brand name RSM. McGladrey LLP is the leading U.S. provider of assurance, tax and consulting services focused on the middle market, with 8,000 professionals and associates in 80 cities nationwide. A licensed CPA firm, McGladrey serves clients around the world through RSM International, a global network of independent accounting, tax and consulting firms. For more information, join our Facebook fan page at McGladrey News, follow us on Twitter @McGladrey, and connect with us on LinkedIn, and/or on YouTube.

 

Contact for Media Only:

Terri Andrews
Director, National Public Relations

terri.andrews@mcgladrey.com
980.233.4710


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