Consumer Products & Services

Highly competitive, the consumer products industry faces challenges to maintaining profitability levels

The consumer products business is highly competitive in the U.S. market. In many product categories, CP companies compete not only with widely advertised branded products, but also with private label products that are generally sold at lower prices.

The business results are also heavily influenced by changes in foreign currency exchange rates. For most of the companies operating in this industry, approximately 50% of net sales and majority of operating segment income are generated from overseas markets. As a result, changes in foreign currency exchange rates, particularly of the Euro, can have a significant impact on their reported results.

The business results are also heavily influenced by changes in foreign currency exchange rates. For most of the companies operating in this industry, a significant part of revenue is generated from the overseas markets. As a result, changes in foreign currency exchange rates, particularly of the Euro, can have a significant impact on their reported results.

‘Recession-proof’ baby food products

While much of the CP industry, including the food segment, is expected to witness a drop in sales or flat growth in 2009, the baby food products industry shows no signs of a slowdown. Specialty food generated $48 billion in retail sales last year, an 8.4% increase over 2007. According to the annual State of the Specialty Food Industry report, baby food experienced the largest sales growth in the specialty food market between 2006 and 2008. In 2008, specialty baby food generated retail sales of $58 million (excluding Wal-Mart and Trader Joe’s), a 69% increase over 2006. Parents are increasingly seeking out frozen and other specialty baby food with no additives, preservatives, genetically modified ingredients, synthetic fertilizers, antibiotics, high-fructose corn syrup, or pesticides.

Baby food is one of the three specialty categories – yogurt/kefir and refrigerated juices/functional beverages being the other two – that recorded more than 50% sales growth between 2006 and 2008. According to a study by MarketsandMarkets, the global baby food market is expected to grow at a Compounded Annual Growth Rate (CAGR) of 5% over the next five years to reach $37.6 billion by 2014. North America is the largest baby food market, and is expected to grow up to $14.17 billion by 2014, accounting for nearly 37% of the global market.