Category Trends Show that CG Companies Dread the "R" Word
It's no secret. Prices have gone up, employment has gone down and everyone is feeling the economic pressures of a possible recession. Although no one wants to even hear that dirty "R" word, it is hard to ignore. As consumers are forced to reprioritize their spending habits, consumer goods (CG) companies are forced to reevaluate their marketing strategies.
A recent study conducted by The Nielsen Company, concludes that CG companies are going to not only be the ones least affected by a recession, but they are also the most affected by a recession. How is that possible? According to Nielsen's analysis of macroeconomic variables, historical trends and consumer behavior, consumer goods products fall into one of the two categories below:
| 5 Recession Proof categories | 5 Recession Vulnerable Categories |
| Seafood | Carbonated Beverages |
| Dry Pasta | Eggs |
| Candy | Cups/Plates |
| Beer | Food Prep/Storage |
| Pasta Sauces | Tobacco |
Source: The Nielsen Company, Predictive Macroeconomic Impact System
Many consumers are still in denial about the current financial hardships, but the numbers are showing that something is affecting our economy. It is hard to pinpoint the source of this status, but the analysis, like Nielsen's, help to target who will feel it most. Some CG companies, such as those mentioned below, are dealing with a possible recession in their own ways.
According to an article on CNNMoney.com, soft drink bottler Coca-Cola Enterprises Inc. says that weak domestic sales trends, especially on some 20-ounce beverages, will likely lead to a decline in its second quarter earnings and may make it difficult to meet its 2008 profit guidance.
It was said in the same article that the
Coca-Cola is not the only carbonated beverage manufacturer struggling right now. PepsiCo seems to be dealing with low numbers by merging with or developing more juice and water brands. So far this year, PepsiCo has merged with V Water, a leading vitamin water brand in the
A press release revealed that Pilgrim's Pride Corporation planned to reduce weekly chicken processing by approximately 5 percent in the second half of fiscal 2008, when compared to the same period a year ago, as part of its continuing effort to better balance supply and demand amid record-high costs for feed ingredients such as corn and soybean meal.
The reduction began with eggs set earlier this month, and took full effect with weekly processing beginning in June 2008. The company says the reduction will remain in effect until average industry margins return to more normalized levels. The 5 percent reduction includes the impact of the previously announced closing of the Pilgrim's Pride plant in
"Soaring feed-ingredient costs fueled by the federal government's misguided ethanol policy has created a crisis in our industry, the true effects of which are only just now beginning to be felt by American consumers in the form of higher food prices," said Clint Rivers, president and chief executive officer, Pilgrim's Pride, in a statement on April 14, 2008." Over the past two weeks, a growing number of smaller chicken producers have announced production cutbacks in an effort to manage these unprecedented increases for corn and soybean meal, which are expected to add billions of dollars of cost to our industry this year."
It hasn't been said that CG companies that produce carbonated beverages, eggs, cups/plates, food prep/storage and tobacco are doomed for tough times ahead. Alternative marketing strategies can help. With consumers spending less, eating in more and taking on second jobs, it will be harder for them to splurge on those products that they want, as opposed to those products that they need.
Eugene Roytburg, managing director for The Nielsen Company, has some advice for CG companies in both categories: "For products that are performing strong and showing immunity during a recession, manufacturers and retailers in these industries have the opportunity to increase product exposure even further. For products at the other end of the spectrum, companies would be well-advised to target their marketing efforts to shore up performance and maintain traction during tough times."