Consumer Products Companies Plan Major Investments

Seventy-two percent of U.S. consumer products companies are optimistic about the U.S. economy over the next 12 months, up from 64% last quarter, according to PricewaterhouseCoopers’ (New York) Retail & Consumer Industry Practice’s Consumer Products Barometer, just released. A significant portion of the companies—71%--also expressed optimism about the world economy.

“The fourth quarter reveals an overall upbeat picture in regards to economic optimism,” said John Maxwell, leader of PricewaterhouseCoopers’ Retail & Consumer Industry Practice. “More consumer products companies are planning major new investments than ever before, as the majority of companies are expecting positive revenue growth over the next 12 months.”

More than half of executives surveyed are planning major new investments of capital (56%) within the next year, a 13 percentage-point increase from last quarter. While most companies are investing in information technology (66%) and marketing sales/promotion (58%), executives also cite new product/service introductions (56%) and advertising (48%) as two other areas for major investments.

To add to the positive outlook, 84% of consumer products companies predict an average 6.6% revenue growth over the next year. Additionally, 70% of executives are considering other business initiatives to drive growth, with 38% citing mergers and acquisitions as their main focus.

Despite the rosy picture, executives are holding back on hiring new workers, with only 30% planning to hire additional workers over the next 12 months, bringing the percentage of net new employees in the workforce to minus 1.1%. More than half of respondents have plans to keep worker levels the same (58%).

When asked about potential barriers to growth, executives were most concerned about energy prices (54%) and lack of market demand (40$), consistent with the previous quarter’s responses. Thirty-four percent of executives, however, were also anxious about pressure for increased wages, 32% were worried about legislative/regulatory pressures while another 30% expressed concern regarding the lack of qualified workers.

Gross margins remained flat for consumer products companies in the fourth quarter; 48% said their margins stayed the same from the third to the fourth quarter. As for increases and decreases, the ratio was evenly split at 26% with each reporting either an increase or decrease in margins.

In addition, 54% of executives reported higher costs during this previous quarter, an 11-point increase from Q3. To compensate for higher costs, 32% of consumer product companies increased their prices.

Source: PricewaterhouseCoopers

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