Companies expect recovery in 2011. - A recent KPMG report reveals that consumer goods and distribution companies are optimistic for 2011 as a whole, expecting growth in their markets this year. Having come through the period of recession, companies are demonstrating a certain resilience in the face of recent events, with 64% saying that the crises have had little or no effect on their business. KPMG questioned almost 300 financial directors from the world's largest consumer goods and distribution companies. The main findings: - More thought to risk management. When asked about the main expected short-term consequences of the crises, 61% replied increased energy and raw materials prices. For the long term, it is energy price volatility which comes out on top (41%). The crises are causing companies to give greater thought to their risk management: 36% of the firms surveyed intend to develop their risk management policy and 37% to review their supply chains and their network of suppliers. - Consumption boosted by the emerging countries. Of financial directors surveyed 76% predict an increase in consumer spending on their target markets in 2011. Expectation is particularly high of the emerging markets and in the BRICs (Brazil, Russia, India and China). Of the companies in the sector, 67% think that the growing middle classes in the emerging countries will have a positive impact on their business over the next five years. The Asia-Pacific zone is seen as a driver: 50% of the firms surveyed think that growth will come essentially from the Asian countries. Of North American players, 58% share this point of view. Prospects for Europe and North America are more circumspect, mainly for four reasons: (1) consumers save more; (2) they are very aware of the safety, health and sustainable development issues; (3) they consume fewer luxury products; (4) the age of the population is increasing. - Cost of raw materials is reducing margins. Of the companies surveyed, 45% say that they will have difficulty maintaining their margins in 2011. The main reasons quoted are the cost of raw materials and goods (57%), closely followed by trade discounts (51%) and the volatility of costs (37%). Almost half of the companies surveyed say their costs have increased as a result of changes of health, food safety and sustainable development standards and rules. Of the companies, 60% believe that it will be difficult for them to increase sales prices in 2011. Asia-Pacific is the region where uncertainty is highest. - Organic growth and acquisitions are main levers of growth. While the economic recession may have hit consumer goods companies hard over the last three years, those still standing have come out stronger: 50% say they now have a better cost structure, better growth prospects and better relations with their suppliers. Organic growth is the growth strategy most often cited by companies: 74% plan to enter new markets, mainly through opening new sales outlets and putting in place additional distribution channels. Those planning an acquisition or a merger in 2011 number 25%. - Improving the supply chain and investment in information systems. Of the companies surveyed, 50% intend to improve their distribution structure, invest in technology, reduce stocks and consolidate their networks of suppliers. Those considering investing in customer relationship management, planning and business intelligence information systems number 70%. One of the major challenges for the companies of the sector is to turn the huge amount of data they gather into competitive advantage. This information is still largely under-used because of the disparity of IT systems, the great variety of data and the inability to produce cross-section analyses which make sense of the data and provide the broad perspective that are essential to the development of the company, KPMG points out. (IL/transl.rt)