Consumer goods sales to rise in 2010

18 November 2009

NEW YORK: Major players in the US consumer goods market should return to growth in 2010, having suffered particularly heavily during the financial crisis, Fitch, the global ratings agency, has predicted.

Sales in the personal care and household goods sectors rose every year from 2003 to 2008, but are slowing in 2009 as shoppers rein in their expenditure levels.

Standard & Poor's Household and Personal Products Industry Group index, which tracks the share prices of firms in these segments, has also improved by just 6.8% this year, indicating equal caution among investors.

More positively, Grace Barnett, a ratings director at Fitch, has now argued that "next year this industry will finally go back to normal, which is to have positive top line growth."

Procter & Gamble and Kimberley-Clark were among the manufacturers expected to see their revenues climb by at least 5% in 2010, Barnett said.

Alberto Culver, Church & Dwight and Clorox are also likely to post similar expansion rates during this period, she added.

Colgate-Palmolive and Avon could also register substantial gains if the current unfavourable currency situation changes, as they derive more than 75% of sales from outside the US.

"Those two companies certainly will get the big benefit as it kind of turns around," Barnett suggested.

However, the key drivers of growth are still set to be the BRICs, comprised of the rapidly-developing economies of Brazil, Russia, India and China.

Based on Fitch's estimates, this group of countries will see GDP levels record an average uptick of 3.7% in 2009 and 6.5% in 2010, with knock-on benefits in terms of consumer spending.

Acquisitions may be another way for brand owners to make progress, with Unilever's recent purchase of Sara Lee's personal care arm one recent example of renewed activity in this area.

"There will be more people looking at acquisitions, mostly sort of fill-in, and they can certainly support it from their cash flow situation," said Barnett.

Alberto Culver and Colgate are in a particularly strong financial position as far as making such moves in the future are concerned, she added.

Data sourced from Reuters; additional content by Warc staff