KPMG is today publishing its inaugural ‘CPG Organic Growth Barometer’ which tracks the organic revenue growth of the largest Consumer Packaged Goods (CPG) companies in the world.
In 2015, median organic revenue growth was 3% though this improves to 4.2% if viewed over the five year period to 2015. However, both in 2015 and over the five years, the top quartile or ‘superior’ performers were delivering organic growth of at least 5% per annum (pa).
Focusing on these top performers, the research shows that superior organic revenue growth is achievable for CPG companies regardless of their size, international spread, market focus or critical strategic choices.
Commenting on the launch of the barometer, Liz Claydon, UK head of consumer markets at KPMG, said: “Driving strong sustainable organic revenue growth is the most significant performance challenge facing consumer goods companies today.
“Over the past few years, we have seen many companies attribute lower growth rates to macro-trends such as changing consumer appetites, over or under reliance on developed or developing markets and economic uncertainty to name but a few. However, the findings in this study are telling us, that whilst recognising these play a part, the winners have been able to navigate through these challenges and still deliver superior performance.
“In my view, this is ultimately down to the clarity and execution of their chosen strategies – in other words, despite external challenges, CPG companies have no excuses when it comes to realising organic growth.”
Who are the ‘superior’ performers?
This first report defines ‘superior’ performers as those companies that exceed the top quartile threshold in our study group on a five year compound annual growth rate (% CAGR; 2010-2015) basis.
Eleven companies make up the top quartile in the five year period to 2015 with those ranked achieving organic revenue growth of at least 5.1% pa, as illustrated in the figure below.
These 11 ‘superior’ performers participate in a wide variety of categories including: beauty, confectionery, infant nutrition, dairy, beer, hot beverages, spirits, water, packaged groceries, oral care, household care and pet food. What’s interesting about these companies is that there are actually very few, if any, similarities between them:
Participation in multiple product categories vs single category
Nestlé (which includes KitKat, Nescafe and Purina) and Danone (which includes Evian, Aptamil, and Activia) participate in multiple product categories whereas Lindt & Sprüngli (‘Lindt’) and Hershey have achieved growth by focusing on a single category.
Portfolio of global megabrands vs local or regional brands
Brown Forman (which includes Jack Daniels) and Colgate-Palmolive have global megabrands at the core of their brand portfolio; whereas companies like Parmalat (which offers dairy products and fruit based drinks) and SABMiller (which includes Fosters) have portfolios with significant contribution from local or regional brands.
A focus on mainstream vs premium
Anheuser Busch InBev (which includes Budweiser and Beck’s) and Hershey have realised growth by targeting, primarily, the mainstream segments in their markets. In contrast, Lindt and Estée Lauder (which includes Clinique and La Mer) have capitalised on opportunities in premium segments.
Exposure to developed vs developing markets
Brown Forman and Lindt have achieved superior performance by targeting the developed markets of Western Europe and North America. Yet in contrast, Mead Johnson (which includes children and infant nutritional brands such as Enfamil) and SABMiller have significant exposure to developing markets and regions such as China, Africa, and Latin America.
Large vs Small
The companies in this top quartile also cover a wide spectrum of scale. Three of the superior performers (Nestle, £59bn revenues in 2015; Anheuser Busch InBev, £26bn; and Danone, £18bn) are amongst the 10 largest CPG companies in our study group. But the superior performers also include companies with much more modest revenues, such as Lindt and Brown Forman with revenues of around £2bln.
Jim Grover, senior advisor to KPMG in the UK, commented: “Several of these top quartile performers have established a track record of consistent growth over the past five years. What’s most interesting, is the range of strategies and scale amongst these companies which suggests that there’s no one-size fits all approach when it comes to superior performance and no single success formula. Instead, our research suggests, that a variety of different strategies and focus can lead to success and underpin the delivery of sustainable organic revenue growth.”
Focusing on 2015
For many companies, market conditions in 2015 were especially challenging but despite this, seven companies tracked in the ‘CPG Organic Growth Barometer’ posted organic revenue growth of at least 6% growth; twice the median growth rate of 3% in 2015.
Overall revenue growth 2015
|Lindt & Sprungli||7.1%|
Whilst five of these seven companies were top quartile performers over the five year period to 2015, two are new having posted particularly good growth in the last 12 months.
Commenting on the 2015 results, Liz Claydon, added: “What is interesting about the high performing companies in the past year is the prominence of those tapping into two key consumer trends: premiumisation and health and wellness.
“Lindt & Sprüngli not only evidenced strong growth in 2015, but achieved consistently superior organic growth over the past five years. The brand is clearly targeted at the premium segment of the confectionary market, leveraging consumers’ growing appetite for high-quality products. WhiteWave, which put in a particularly strong performance over the past year, is a newer name but has assembled a portfolio of leading wellness and healthy eating brands, such as Alpro and Silk, positioned to capitalise on the trend towards ‘better for you’ foods.
“This is not to say that any company targeting the health and wellness or the premium trends will be successful. These top performers have established brands with a compelling proposition and have been extremely clear about what they stand for in their chosen markets. The challenge, of course, for these superior growth companies, is maintaining their impressive growth rates into the future. The evidence of the past suggests that some will, and some won’t.”
A full copy of the report can be accessed here.
Notes to editors
The Barometer is based on an analysis of the organic revenue growth of 52 of the largest 65 CPG companies, by revenue, over the five year period to 2015, who:
For the purposes of this study, organic revenue growth is defined as like-for-like year-on-year % revenue growth at constant currency and excluding the impact of M&A and divestments from one year to the next. Key components of organic revenue growth have been assumed to be price, mix and volume changes.
For further information please contact:
Jess Liebmann, KPMG Corporate Communications
Tel: 0207 311 3245
KPMG Press office
Tel: +44 (0) 207 694 8773
KPMG LLP, a UK limited liability partnership, operates from 22 offices across the UK with approximately 12,000 partners and staff. The UK firm recorded a revenue of £1.96 billion in the year ended September 2015. KPMG is a global network of professional firms providing Audit, Tax, and Advisory services. It operates in 155 countries and has 174,000 professionals working in member firms around the world. The independent member firms of the KPMG network are affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. Each KPMG firm is a legally distinct and separate entity and describes itself as such.