Volumes at the world’s largest consumer packaged goods companies tumbled for the first time in a decade last year as battered consumers sought out cheaper options in the face of constant price increases.
The OC&C Global 50 report revealed a sharp decline in headline growth to just 2.7% in 2023, compared with 10.9% in the prior year. Organic growth of 7.9% – fuelled by another 8.7% jump in pricing on top of 10.7% in 2022 – remained significantly ahead of pre-pandemic levels but was dragged down by currency headwinds and a lack M&A activity as the major multinationals focused more on selling off unprofitable non-core assets.
Volumes declined 0.9% last year after remaining solid throughout 2022’s price hikes.
Profitability also sank to the lowest level for five years as the tail end of cost price increases filtering through to supermarket shelves was offset by a sharp rise in marketing and labour costs. Profit margins slipped by 0.1 percentage points to 17.7% in 2023.
“It’s a back to the future moment for the industry,” said OC&C managing partner Will Hayllar. “As volumes declined for the first time in a decade – and inflation stabilises – the focus of the industry has rapidly shifted back to the age-old question of how to drive real growth.
“Whilst the question is an old one, the answers needed will be new as the previous big growth drivers of widespread premiumisation and growth in China are both now more challenging. Consumer goods giants are looking hard to tap into the pockets of growth that still exist in categories, as well as shifting geographic focus to increase exposure to growth in Southeast Asia and India.
“The hunt for growth is happening against a context of margins that are still below historic averages. While gross margins started to recover in the last year the industry saw operating costs increase as the lingering effects of inflation increased labour costs. Many players are deploying AI technologies to find efficiencies in operating costs as well as get smarter in generating effective NPD and deploying marketing investment efficiently to capture growth.”
Nestlé remained the biggest company in the industry, topping the index in terms of revenues, with sales of $103.4bn, followed by PepsiCo ($91.5bn) and Procter & Gamble ($81.2bn).
Mondelez broke into the top ten, moving up three places and pushing out British American Tobacco, as acquisitions, investing in marketing and the use of AI to focus R&D efforts helped sales grow 14.4% to $36bn.
To read a full analysis on this year’s OC&C Global 50, click here
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