Despite the economy and trends to the contrary in other industries, leading U.S. food and beverage makers have ample cash -- and their growth strategies call for using that to make acquisitions over the next few years, according to a new survey of senior food/beverage executives from KPMG LLP, the U.S. audit, tax and advisory services firm.
Nearly two-thirds (62%) of the 100 executives interviewed in June reported that their companies have significant cash on hand for acquisitions and expansion into new markets, and fully 67% said they expect to be involved in a merger or acquisition as a buyer or seller within the next two years.
Thirty-nine percent said their cash will be deployed this year, and another 39% said this will happen in 2012. In addition, 58% said their companies will increase capital spending over the next year (with half projecting increases of 6% or more) for acquisitions, new products and services, facility expansion and information technology.
The executives indicated that "they will drive revenue, while dealing with pricing pressures, by focusing on retaining and adding new customers," reported Patrick Dolan, KPMG's national line of business leader.
One-quarter of respondents were from companies that had annual revenues of more than $10 billion in their most recent fiscal years, one-third from companies with revenues of $1 billion to $10 billion; and 42% from companies with revenues of $100 million to $1 billion.
However, the executives also acknowledged significant challenges and hurdles to growth. More than half (54%) cited pricing pressures (54%) as their most significant growth barriers within the next year, and 40% cited volatile commodity/input prices. Labor costs and lack of customer demand were cited by 25% and 20%, respectively.
While looking to further reduce costs and improve working capital through supply-chain and other operational improvements, the companies' primary focus for the next year is organic growth. And nearly three-quarters (72%) said that customer data analytics -- which enable understanding and adapting to changing consumer behavior, as well as better interfacing with consumers -- are central to achieving growth objectives and realizing competitive advantages.
The executives' outlook for the overall economy is decidedly mixed. While 54% expect the economy to improve next year, 37% expect little change. As for a full recovery or turnaround, 30% expect that to happen by the end of 2012, 35% by the end of 2013, and 32% by the end of 2014.
Most (61%) expect their revenue to be moderately higher a year from now, and just 7% expect significant revenue gains.
Still, the moderately optimistic outlook will add some jobs. Nearly half (46%) said they plan to add personnel next year, although 38% expect an increase of less than 6%.
More than one quarter (27%) expect headcounts to return to pre-recession levels by the end of this year, but nearly as many (23%) don't expect that to happen until the end of 2014 or later, while 14% expect it to happen by the end of 2012, and 13% by the end of 2013.
The least positive news: 19% expect that headcounts will never return to pre-recession levels.