Consumer products companies new ‘winners’ of the recession - Ernst & Young - Global

London, 19 August 2009 — More than two-thirds of global consumer products (CP) companies say they have achieved their target cost reductions effectively in the recession. CP companies also see greater opportunities for further cost reduction than firms in other sectors, particularly across the supply chain, with 62% eyeing additional gains versus 48% across all sectors, according to Ernst & Young’s Opportunity in Adversity research released today.

The survey of board-level executives across the industry reveals that the CP industry has fared better than many other sectors during the recession. And although the slow-down in consumer demand is producing tough challenges for CP companies, many have been very responsive in the areas of pricing, cost management, supply chain, customer management and working capital to drive opportunities for their businesses.

Howard Martin, Global Consumer Products Leader at Ernst & Young, says: “On the whole, CP companies have ridden out the recession relatively well. In part, this is due to the natural resilience of much of the sector to downturn. But it also reflects these companies’ ability to execute faster and harder on many of the performance improvement initiatives already underway before the recession struck.”

Working capital management has been a key area of focus. Eighty percent of CP respondents have undertaken a top-down review of their current cash management and cash flows, compared with 73% across all sectors CP companies have also shown consistent attention to improving the effectiveness and efficiency of their supply chains and operations. Yet 62% of CP companies surveyed also believe that their work is far from done, and they are already looking at further cost reduction opportunities for the next 12 months.

“Done properly, both supply chain and cost reduction programs can become ‘embedded into the DNA’ of the organization, helping successful CP companies achieve market leadership and greater resilience in the face of the recession,” continues Martin.

CP companies’ plans of action, according to the survey, include emerging stronger than their competitors, notably in accelerating time to market (56%) and in expanding their presence in emerging markets – not just in the major developing countries such as China, Russia and India but also in less established markets across Asia, Latin America and Africa (41%).

“Once the world economy emerges from the recession, those CP companies that are better prepared to drive volume growth on a global scale, will undoubtedly become the sector’s winners. Indeed these companies will be using these difficult times opportunistically to get fitter, leaner and in the best possible shape to take advantage of the good times when they return,” says Martin.

About the report
The sector sample of 39 consumer products companies is taken from a wider report, surveying 569 C-suite and board level executives. Respondents were drawn from across the world and across industry sectors. Over half the executives polled worked for companies with an annual global revenue in excess of US$1 billion. The research was carried out in June 2009. Responses are rounded to the nearest percentage.

About the Global Consumer Products Center
Whether it’s squeezed margins, brand erosion, business complexity or new regulatory requirements, today’s consumer products companies must think differently in order to prosper. Ernst & Young’s Global Consumer Products Center brings together a worldwide team of professionals to help you achieve your potential — a team with deep technical experience in providing assurance, tax, transaction and advisory services. The Center works to anticipate market trends, identify the implications and develop points of view on relevant industry issues. Ultimately it enables us to help you meet your goals and compete more effectively. It’s how Ernst & Young makes a difference.

About Ernst & Young
Ernst & Young is a global leader in assurance, tax, transaction and advisory services. Worldwide, our 135,000 people are united by our shared values and an unwavering commitment to quality. We make a difference by helping our people, our clients and our wider communities achieve their potential.

For more information, please visit www.ey.com.

Ernst & Young refers to the global organization of member firms of Ernst & Young Global Limited, each of which is a separate legal entity.
Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients.

This news release has been issued by EYGM Limited, a member of the global Ernst & Young organization that also does not provide any services to clients.