Food/Bev Execs Cautiously Optimistic About '10

Food and beverage executives are generally optimistic about their industry's outlook for next year, despite their belief that overall economic recovery is likely to take longer, according to a new survey from KPMG LLP, the audit, tax and advisory firm.

The industry-specific survey, conducted for KPMG by Clarion Research Inc. between May and July, drew responses from 65 CEOs and other C-level executives. About 20% of respondents were from companies with annual revenue exceeding $1 billion, 29% from companies with revenue between $250 million and $1 billion; and 51% from companies with revenue of less than $250 million.

Nearly half (48%) of the executives believe that the U.S. economy as a whole may not see substantial recovery until 2011 or beyond. The respondents consider the most important factors in spurring that recovery to be increased spending by consumers (cited by 46%), more jobs and increased employment (also 46%), and improved consumer confidence (45%).



However, 65% said they believe that the food and beverage industry is well-positioned to take advantage of economic recovery, and 60% predicted that their industry will fully recover ahead of the overall economy.

In fact, nearly three-quarters (72%) expect their industry's business conditions to improve next year; the same percentage expect stronger revenue; and about two-thirds (65%) expect improved profitability.

In regard to jobs, 48% said that they have already made head count reductions, and just 22% are considering further cuts. More than half (54%) expect industry jobs to be stable next year, and about a third (32%) believe the job scenario will be better than this year's.

Asked how they have adjusted to cope with the recession, fully 82% cited implementing IT solutions as a means of reducing costs, 63% cited cutting capital expenditures, and 63% said that they had created or modified their risk management plans.

Another positive sign: Asked about current strategy, nearly two-thirds (63%) said that they are focused on investing for growth, versus 37% who indicated that they remain focused on cost-cutting.

The biggest challenges to recovery for the industry, in these senior managers' view, are finding new sources of revenue growth (58%), managing/cutting costs (52%), managing risk (49%) and adjusting to changing customer demand (42%).

In short, industry leaders are upbeat about their business outlook, while recognizing that they must stay on top of the "potentially disruptive" changes still underway -- including cost volatility, declining consumer spending and constraints on working capital, summed up Patrick Dolan, KPMG national line of business leader, consumer markets and U.S. sector leader, food, drink and consumer goods.

In KPMG's experience, F&B companies that use customer insights to create value and cost-effective innovation and succeed in "gaining a single view of their liquidity position, underlying supply chain and the alignment between performance and risk" will weather the "shocks created by market volatility," Dolan added.

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