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The Grocery Manufacturers Association (GMA) and and PricewaterhouseCoopers LLP are out with a new study, entitled “Forging Ahead in the New Economy,” which suggests that “consumer packaged goods (CPG) companies will need to employ different tactics than those used during the recession - divesting non-core brands, conserving cash, and cutting costs - to preserve shareholder value as the economy recovers. To grow revenues in this new climate, companies will have to focus on innovation to encourage household spending, especially for products in mature segments and to offset reduced spending by Baby Boomers who are nearing retirement.”

Other conclusions from the report:

• “Many CPG companies are looking to innovate by reaching consumers in more places or tailoring products for local customer tastes in emerging markets. Additionally, understanding customer priorities is central to innovation as consumers in the United States are buying more carefully, buying different pack sizes, taking advantage of volume discounts, and trading down to non-premium brands.”

• “Establishing a foothold in emerging markets - especially in China, Russia, Brazil, India, and Southeast Asia - has taken on a sense of urgency for CPG makers as capital flows faster than ever and new competitors can ramp up quickly. The middle classes are growing and forming attachments to new brands and products just as fast. Consequently, product growth cycles in emerging markets have accelerated and the success or failure of a product launch or brand introduction now can be determined in a matter of just 12 or 18 months.”

“These food, beverage, and household product companies are part of a true counter cyclical industry, as it performs better than other industries during recessions, but tends to balance the scales with slower growth during expansions, as was the case in 2009," says Susan McPartlin, U.S. consumer packaged goods industry leader, PricewaterhouseCoopers. "This may reflect the fact that CPG companies have been adapting to market conditions and sacrificing a bit of short-term growth to get their houses in order through increasing sales per employee, paying down debt, trimming workforces, and paring brand and product portfolios. We expect CPG companies to emerge much stronger as we move through 2010."
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