Click here to close now.


News Feed Item

FMCG Companies Need To Drive Margins As Economy Turns

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.

CP margins demonstrate consistency compared to other sectors
  • 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%.
Low margin growth is impacting share performance
  • 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:

  1. 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
  2. Investment in data to improve business insights that enable better, faster decisions
  3. 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:

The term "margin" refers to operating margin (operating margin/revenue, or earnings before interest, tax, depreciation and amortization EBITDA as a percentage of revenue).

About EY

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

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.

Pam Christie   

Michelle Sing

EY Global Media Relations 

Ernst & Young LLP

+44 (0)20 7980 0673


[email protected]

[email protected]


Building a better working world logo.



More Stories By PR Newswire

Copyright © 2007 PR Newswire. All rights reserved. Republication or redistribution of PRNewswire content is expressly prohibited without the prior written consent of PRNewswire. PRNewswire shall not be liable for any errors or delays in the content, or for any actions taken in reliance thereon.

Latest Stories
The cloud. Like a comic book superhero, there seems to be no problem it can’t fix or cost it can’t slash. Yet making the transition is not always easy and production environments are still largely on premise. Taking some practical and sensible steps to reduce risk can also help provide a basis for a successful cloud transition. A plethora of surveys from the likes of IDG and Gartner show that more than 70 percent of enterprises have deployed at least one or more cloud application or workload. Y...
PubNub has announced the release of BLOCKS, a set of customizable microservices that give developers a simple way to add code and deploy features for realtime apps.PubNub BLOCKS executes business logic directly on the data streaming through PubNub’s network without splitting it off to an intermediary server controlled by the customer. This revolutionary approach streamlines app development, reduces endpoint-to-endpoint latency, and allows apps to better leverage the enormous scalability of PubNu...
Microservices are a very exciting architectural approach that many organizations are looking to as a way to accelerate innovation. Microservices promise to allow teams to move away from monolithic "ball of mud" systems, but the reality is that, in the vast majority of organizations, different projects and technologies will continue to be developed at different speeds. How to handle the dependencies between these disparate systems with different iteration cycles? Consider the "canoncial problem"...
Growth hacking is common for startups to make unheard-of progress in building their business. Career Hacks can help Geek Girls and those who support them (yes, that's you too, Dad!) to excel in this typically male-dominated world. Get ready to learn the facts: Is there a bias against women in the tech / developer communities? Why are women 50% of the workforce, but hold only 24% of the STEM or IT positions? Some beginnings of what to do about it! In her Day 2 Keynote at 17th Cloud Expo, San...
Apps and devices shouldn't stop working when there's limited or no network connectivity. Learn how to bring data stored in a cloud database to the edge of the network (and back again) whenever an Internet connection is available. In his session at 17th Cloud Expo, Ben Perlmutter, a Sales Engineer with IBM Cloudant, demonstrated techniques for replicating cloud databases with devices in order to build offline-first mobile or Internet of Things (IoT) apps that can provide a better, faster user e...
Container technology is shaping the future of DevOps and it’s also changing the way organizations think about application development. With the rise of mobile applications in the enterprise, businesses are abandoning year-long development cycles and embracing technologies that enable rapid development and continuous deployment of apps. In his session at DevOps Summit, Kurt Collins, Developer Evangelist at, examined how Docker has evolved into a highly effective tool for application del...
I recently attended and was a speaker at the 4th International Internet of @ThingsExpo at the Santa Clara Convention Center. I also had the opportunity to attend this event last year and I wrote a blog from that show talking about how the “Enterprise Impact of IoT” was a key theme of last year’s show. I was curious to see if the same theme would still resonate 365 days later and what, if any, changes I would see in the content presented.
Cloud computing delivers on-demand resources that provide businesses with flexibility and cost-savings. The challenge in moving workloads to the cloud has been the cost and complexity of ensuring the initial and ongoing security and regulatory (PCI, HIPAA, FFIEC) compliance across private and public clouds. Manual security compliance is slow, prone to human error, and represents over 50% of the cost of managing cloud applications. Determining how to automate cloud security compliance is critical...
Internet of @ThingsExpo, taking place June 7-9, 2016 at Javits Center, New York City and Nov 1-3, 2016, at the Santa Clara Convention Center in Santa Clara, CA, is co-located with the 18th International @CloudExpo and will feature technical sessions from a rock star conference faculty and the leading industry players in the world and ThingsExpo New York Call for Papers is now open.
With major technology companies and startups seriously embracing IoT strategies, now is the perfect time to attend @ThingsExpo 2016 in New York and Silicon Valley. Learn what is going on, contribute to the discussions, and ensure that your enterprise is as "IoT-Ready" as it can be! Internet of @ThingsExpo, taking place Nov 3-5, 2015, at the Santa Clara Convention Center in Santa Clara, CA, is co-located with 17th Cloud Expo and will feature technical sessions from a rock star conference faculty ...
We are rapidly moving to a brave new world of interconnected smart homes, cars, offices and factories known as the Internet of Things (IoT). Sensors and monitoring devices will touch every part of our lives. Let's take a closer look at the Internet of Things. The Internet of Things is a worldwide network of objects and devices connected to the Internet. They are electronics, sensors, software and more. These objects connect to the Internet and can be controlled remotely via apps and programs. ...
Today air travel is a minefield of delays, hassles and customer disappointment. Airlines struggle to revitalize the experience. GE and M2Mi will demonstrate practical examples of how IoT solutions are helping airlines bring back personalization, reduce trip time and improve reliability. In their session at @ThingsExpo, Shyam Varan Nath, Principal Architect with GE, and Dr. Sarah Cooper, M2Mi’s VP Business Development and Engineering, explored the IoT cloud-based platform technologies driving t...
SYS-CON Events announced today that Alert Logic, Inc., the leading provider of Security-as-a-Service solutions for the cloud, will exhibit at SYS-CON's 18th International Cloud Expo®, which will take place on June 7-9, 2016, at the Javits Center in New York City, NY. Alert Logic, Inc., provides Security-as-a-Service for on-premises, cloud, and hybrid infrastructures, delivering deep security insight and continuous protection for customers at a lower cost than traditional security solutions. Ful...
We all know that data growth is exploding and storage budgets are shrinking. Instead of showing you charts on about how much data there is, in his General Session at 17th Cloud Expo, Scott Cleland, Senior Director of Product Marketing at HGST, showed how to capture all of your data in one place. After you have your data under control, you can then analyze it in one place, saving time and resources.
As organizations shift towards IT-as-a-service models, the need for managing & protecting data residing across physical, virtual, and now cloud environments grows with it. CommVault can ensure protection & E-Discovery of your data - whether in a private cloud, a Service Provider delivered public cloud, or a hybrid cloud environment – across the heterogeneous enterprise.