Global fmcg giants see sales fall for first time in more than a decade

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OC&C Global 50

Headline revenues of the world’s largest fmcg players have fallen for the first time in more than a decade, as the sector remains under more pressure than even at the height of the global credit crunch.

The 2017 OC&C/Grocer Global 50 report released this week reveals sales across fmcg’s 50 biggest players dropped by 0.7% in 2016, the first drop since 2003. Last year, growth stood at 0.3%.

Even during the depths of the global recession in 2009, the sector still recorded growth of 0.6%.

The global fmcg industry has come under increasing pressure from the fragmentation of consumer tastes and buying habits in the West, weakening economic conditions in many emerging markets, and the global rise of smaller, specialist brands.

Organic sales growth also slowed last year, dropping from 3.4% to 2.6% across the companies that split out the figure.

OC&C’s head of consumer goods Will Hayllar commented: “Without a rising tide of inflation or rapid growth of major emerging markets, the global fmcg giants are facing a fundamental growth challenge in core markets, with consumer spending shifting from consumer goods towards other technology and leisure uses, and a plethora of small insurgent competitors attracting the interest of fragmenting consumer segments.”

These pressures have forced international players to shift focus to the bottom line, where there is more cause for optimism as gross margin across the Global 50 increased by 1.1ppts to a multi-year high of 46%.

Profits were boosted by benign commodity prices, while the increasing influence of 3G Capital’s zero-based budgeting approach is also spreading across the fmcg industry.

The owner of AB InBev and Kraft Heinz has built industry-leading margins through ruthless cost-cutting, and even organic growth stories like Unilever and Nestlé are bring forced by investors to ramp up their earnings targets.

“While grappling with solutions to kick-start their growth, these businesses have come under increasing shareholder pressure to drive rapid profit growth as investors look to replicate the impact that 3G has had on the bottom line of the major fmcg businesses it has acquired,” said Hayllar.

“These often competing priorities constitute a tricky high-wire balancing act for the Global 50’s leadership teams.”

Hayllar did, however, note that some winners were beginning to emerge, as forward-thinking fmcg companies were now achieving incremental growth through aggressively shifting portfolios and resources to faster-growing segments of the market such as premium products and online channels.

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