|By PR Newswire||
|February 25, 2014 12:01 AM EST||
LONDON, Feb. 25, 2014 /PRNewswire/ -- FMCG has been a safe sector for investors looking for predictable margins and stable returns during the economic crisis. However, as the global economy improves, the growth-challenged industry risks losing investor interest.
With profitability under pressure in both developed and emerging markets, EY's new Margin Unlocked report uncovers how consumer goods companies are going to have to work much harder to deliver value to shareholders.
- Relative to other sectors FMCG margins have been predictable and stable since 2003. This has made the sector highly attractive to investors during the economic downturn.
- But despite significant productivity programs and cost saving efforts, margin growth has been slow - only 0.6% during the period as a whole and 0.8% since 2009 - the turn of the economic crisis.
- Since 2009, many other sectors have grown margins more progressively. For example technology has grown margins from 15.2% to 19.4% - an increase of 4.2%.
- FMCG share performance is now lagging other sectors, reflecting investor concern around the sector's profit and growth outlook. This creates potential vulnerability.
"In the last 10 years, consumer products companies have only managed to increase margins by 0.6%", said Richard Taylor, EY Global Consumer Products Advisory Leader. "Although their shares have been something of a safe haven for investors during the downturn, companies are going to have to run much faster to keep their shareholders happy and retain investor interest as the world economy improves and other more volatile sectors potentially begin to out-perform FMCG".
"Consumer products companies are really hurting from what we call the Red Queen effect, where, like in Alice in Wonderland: 'it takes all the running you can do, to keep in the same place.'
Margin improvement is going to be critical to help them speed up their performance over the next 12-24 months," said Andrew Cosgrove, EY Global Consumer Products Lead Analyst.
Barriers to improving margin
Companies identified a variety of reasons why they are failing to grow margin more effectively. According to the report, 39% of companies believe limited margin mindset is the main barrier to improving margins. Other contributing factors include too many locked in fixed costs, insufficient data, a lack of focus from the leadership team, and a lack of margin-related skills and competencies.
Strategies for success that help companies run faster
Sustained improved profitability is one of the most effective routes to retaining investor interest; however consumer goods companies are being challenged from multiple directions. In both developed and emerging markets top-line growth has either slowed dramatically or declined, and continued downward pressure on prices from customers, along with rising input costs, make margin management a complex challenge.
In its Margin unlocked report, EY studied 183 global FMCG companies, including some that have adopted non-traditional margin management behaviours, to find out what makes the difference for high performing companies in the sector.
"On the whole, consumer goods companies recognize that they must apply a more rigorous focus to margin management than has previously been the case", said Gustav Mauer, EY Advisory Director. "The scale of the challenge facing the FMCG sector right now means that companies need a new, company-wide and integrated approach to margin management in order to deliver shareholder value. Our research shows that many consumer goods companies still take a tactical, reactive approach to sustaining or growing margins - making incremental, localized changes focused on a specific part of the profit or loss that fail to deliver sustained, company-wide margin growth."
Three critical success factors identified in research
The report demonstrates there is a considerable range of performance within the industry. Some companies have been able to buck the trend with high performers growing margins from 22.7% to 28.0% - more than seven times higher performance to the rest of the sector.
The report identified three keys to success for FMCG companies looking to outperform in the current environment:
- Senior leaders who take an active approach to breaking down barriers across the organization and who apply innovative, non-traditional thinking to improve margin performance
- Investment in data to improve business insights that enable better, faster decisions
- Managing margin end to end by looking beyond cost reduction and price increases to embed an operating model with margin at its core
Copies of the report are available here: www.ey.com/CP-margins
The term "margin" refers to operating margin (operating margin/revenue, or earnings before interest, tax, depreciation and amortization EBITDA as a percentage of revenue).
EY is a global leader in assurance, tax, transaction and advisory services. The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over.
We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities.
EY refers to the global organization, and may refer to one or more, of the 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. For more information about our organization, please visit ey.com.
This news release has been issued by EYGM Limited, a member of the global EY organization that also does not provide any services to clients.
EY Global Media Relations
Ernst & Young LLP
+44 (0)20 7980 0673
"There's a growing demand from users for things to be faster. When you think about all the transactions or interactions users will have with your product and everything that is between those transactions and interactions - what drives us at Catchpoint Systems is the idea to measure that and to analyze it," explained Leo Vasiliou, Director of Web Performance Engineering at Catchpoint Systems, in this SYS-CON.tv interview at 18th Cloud Expo, held June 7-9, 2016, at the Javits Center in New York Ci...
Jan. 20, 2017 01:30 PM EST Reads: 5,720
The 20th International Cloud Expo has announced that its Call for Papers is open. Cloud Expo, to be held June 6-8, 2017, at the Javits Center in New York City, brings together Cloud Computing, Big Data, Internet of Things, DevOps, Containers, Microservices and WebRTC to one location. With cloud computing driving a higher percentage of enterprise IT budgets every year, it becomes increasingly important to plant your flag in this fast-expanding business opportunity. Submit your speaking proposal ...
Jan. 20, 2017 01:30 PM EST Reads: 5,217
@DevOpsSummit taking place June 6-8, 2017 at Javits Center, New York City, is co-located with the 20th International Cloud Expo and will feature technical sessions from a rock star conference faculty and the leading industry players in the world. @DevOpsSummit at Cloud Expo New York Call for Papers is now open.
Jan. 20, 2017 01:30 PM EST Reads: 3,576
SYS-CON Events announced today that Dataloop.IO, an innovator in cloud IT-monitoring whose products help organizations save time and money, has been named “Bronze Sponsor” of SYS-CON's 20th International Cloud Expo®, which will take place on June 6-8, 2017, at the Javits Center in New York City, NY. Dataloop.IO is an emerging software company on the cutting edge of major IT-infrastructure trends including cloud computing and microservices. The company, founded in the UK but now based in San Fran...
Jan. 20, 2017 01:00 PM EST Reads: 2,567
WebRTC is the future of browser-to-browser communications, and continues to make inroads into the traditional, difficult, plug-in web communications world. The 6th WebRTC Summit continues our tradition of delivering the latest and greatest presentations within the world of WebRTC. Topics include voice calling, video chat, P2P file sharing, and use cases that have already leveraged the power and convenience of WebRTC.
Jan. 20, 2017 12:30 PM EST Reads: 3,176
20th Cloud Expo, taking place June 6-8, 2017, at the Javits Center in New York City, NY, will feature technical sessions from a rock star conference faculty and the leading industry players in the world. Cloud computing is now being embraced by a majority of enterprises of all sizes. Yesterday's debate about public vs. private has transformed into the reality of hybrid cloud: a recent survey shows that 74% of enterprises have a hybrid cloud strategy.
Jan. 20, 2017 12:30 PM EST Reads: 4,342
Discover top technologies and tools all under one roof at April 24–28, 2017, at the Westin San Diego in San Diego, CA. Explore the Mobile Dev + Test and IoT Dev + Test Expo and enjoy all of these unique opportunities: The latest solutions, technologies, and tools in mobile or IoT software development and testing. Meet one-on-one with representatives from some of today's most innovative organizations
Jan. 20, 2017 12:30 PM EST Reads: 1,633
SYS-CON Events announced today that Super Micro Computer, Inc., a global leader in Embedded and IoT solutions, will exhibit at SYS-CON's 20th International Cloud Expo®, which will take place on June 7-9, 2017, at the Javits Center in New York City, NY. Supermicro (NASDAQ: SMCI), the leading innovator in high-performance, high-efficiency server technology, is a premier provider of advanced server Building Block Solutions® for Data Center, Cloud Computing, Enterprise IT, Hadoop/Big Data, HPC and E...
Jan. 20, 2017 12:15 PM EST Reads: 5,822
Hardware virtualization and cloud computing allowed us to increase resource utilization and increase our flexibility to respond to business demand. Docker Containers are the next quantum leap - Are they?! Databases always represented an additional set of challenges unique to running workloads requiring a maximum of I/O, network, CPU resources combined with data locality.
Jan. 20, 2017 11:30 AM EST Reads: 732
WebRTC sits at the intersection between VoIP and the Web. As such, it poses some interesting challenges for those developing services on top of it, but also for those who need to test and monitor these services. In his session at WebRTC Summit, Tsahi Levent-Levi, co-founder of testRTC, reviewed the various challenges posed by WebRTC when it comes to testing and monitoring and on ways to overcome them.
Jan. 20, 2017 10:45 AM EST Reads: 6,075
Internet of @ThingsExpo, taking place June 6-8, 2017 at the Javits Center in New York City, New York, is co-located with the 20th International Cloud Expo and will feature technical sessions from a rock star conference faculty and the leading industry players in the world. @ThingsExpo New York Call for Papers is now open.
Jan. 20, 2017 10:45 AM EST Reads: 3,695
"This week we're really focusing on scalability, asset preservation and how do you back up to the cloud and in the cloud with object storage, which is really a new way of attacking dealing with your file, your blocked data, where you put it and how you access it," stated Jeff Greenwald, Senior Director of Market Development at HGST, in this SYS-CON.tv interview at 18th Cloud Expo, held June 7-9, 2016, at the Javits Center in New York City, NY.
Jan. 20, 2017 09:45 AM EST Reads: 5,507
DevOps is being widely accepted (if not fully adopted) as essential in enterprise IT. But as Enterprise DevOps gains maturity, expands scope, and increases velocity, the need for data-driven decisions across teams becomes more acute. DevOps teams in any modern business must wrangle the ‘digital exhaust’ from the delivery toolchain, "pervasive" and "cognitive" computing, APIs and services, mobile devices and applications, the Internet of Things, and now even blockchain. In this power panel at @...
Jan. 20, 2017 09:45 AM EST Reads: 2,921
SYS-CON Events announced today that Catchpoint Systems, Inc., a provider of innovative web and infrastructure monitoring solutions, has been named “Silver Sponsor” of SYS-CON's DevOps Summit at 18th Cloud Expo New York, which will take place June 7-9, 2016, at the Javits Center in New York City, NY. Catchpoint is a leading Digital Performance Analytics company that provides unparalleled insight into customer-critical services to help consistently deliver an amazing customer experience. Designed ...
Jan. 20, 2017 09:15 AM EST Reads: 6,383
WebRTC services have already permeated corporate communications in the form of videoconferencing solutions. However, WebRTC has the potential of going beyond and catalyzing a new class of services providing more than calls with capabilities such as mass-scale real-time media broadcasting, enriched and augmented video, person-to-machine and machine-to-machine communications. In his session at @ThingsExpo, Luis Lopez, CEO of Kurento, introduced the technologies required for implementing these idea...
Jan. 20, 2017 08:30 AM EST Reads: 4,750