There has been a major shift in the consumer goods industry. Consumer spending in developed markets is hesitant to pick up as is still held back by a sluggish economy and high unemployment. This macro-economic environment, however, has been beneficial for developing countries, where sales have been growing at a fast pace along with optimal branding and positioning.
This industry is governed by big global companies that own a wide portfolio of brands in a variety of categories. If you are planning on adding some consumer goods producers to your portfolio you should take a close look at these three big firms.
Emerging Markets are keeping the growth going
Unilever N.V. (ADR) (NYSE:UN) supplies personal & home care products, food and refreshments on a global scale.
The company showed very good results for its first quarter. Underlying sales rose 4.9% driven by a 2.2% volume increase and a 2.6% gain in prices. The best performance was shown by emerging markets, with a 10.4% year over year growth in underlying sales.
Unilever N.V. (ADR) (NYSE:UN) is characterized by its increasing investments in innovation and improved product quality. The firm is continuously introducing its brands in new markets, which contributes to its growth. Management’s main focus is on emerging markets, which are showing double-digit growth for Unilever N.V. (ADR) (NYSE:UN) while sales remain flat in the developed markets. In order to optimize resources in these promising markets, the firm is focusing on divesting its non-core operations. In Aug. 2012 Unilever sold its frozen foods business to ConAgra Foods, Inc. (NYSE:CAG) and more recently its Skippy peanut butter brand to Hormel Foods Corporation (NYSE:HRL).
I am optimistic about the company’s wide brand portfolio since it guarantees a strong presence and dominant market share. This goes along with Unilever N.V. (ADR) (NYSE:UN)’s acquisition strategy, which recently involved buying Sara Lee and Alberto Culver to strengthen its personal care business in Western Europe and hair products in the U.S. respectively.
The main threats to the company are macro economic challenges, which I expect will persist throughout 2013.
Former CEO coming back to ameliorate performance
The Procter & Gamble Company (NYSE:PG) provides consumer packaged goods in more than 180 countries.
The company reported mixed results for its third quarter. Earnings improved 5% year over year, driven by strong cost savings and lower taxes. However, sales lagged due to slower market performance and weak beauty sales. Management expects fourth-quarter sales to decline compared to the same quarter of 2012 which indicates some concerns. Fiscal 2012 was a tough year for The Procter & Gamble Company (NYSE:PG): So tough that the company just announced the reappointment of its former CEO, A.G. Lafley, replacing his own replacement, Bob McDonald.
We have to acknowledge that The Procter & Gamble Company (NYSE:PG) is an emerging market company and this is where its main efforts should be addressed. Bob McDonald could not manage to successfully execute the company’s strategy in these markets and well, time was up.