Half of food and beverage execs expect to cut jobs or make no changes

NEW YORK, NY – When it comes to specific hiring plans, 23 percent of senior food and beverage executives thought they would cut headcount this year and 26 percent expected no change. The remaining 51 percent said they expect to add headcount – most estimated only in the range of one to three percent.

Senior executives in the food and beverage industry see improved revenue and profitability this year and next, but caution that the jobs outlook in their sector will only gradually improve in 2011 according to a recent survey conducted by KPMG LLP, the audit, tax, and advisory firm.

About two-thirds of executive respondents in the KPMG survey said their revenue and profitability were better now than a year ago, in marked contrast to KPMG’s survey of the sector last summer when less than one-third thought these business measures were better than the previous year.

Regarding jobs, 39 percent of respondents were more optimistic about employment in their sector over the next year, which is seven percentage points higher than last summer’s survey.

When asked to name the biggest drivers of their company’s revenue growth in the next 1-3 years, the food and beverage execs most frequently cited product innovations (89 percent) and innovative merchandising strategies (82 percent) as their top two factors.

“Food and beverage executives are seeing a better economic picture this year relating to their overall business,” said Patrick Dolan, KPMG LLP national line of business leader – Consumer Markets and US sector leader – Food, Drink and Consumer Goods. “However, significant concerns remain over the employment outlook and the continued challenges of heightened competition and aggressive pricing and discounting practices.

“The executives tell us they are also focusing on innovation – in products, in services, and in branding and promotions – to drive growth,” continued Dolan. “A clear illustration of this is the skyrocketing use of mobile Internet and online shopping. Food and beverage executives will need to meet the challenge of marketing to a consumer base growing more technologically savvy every day.”

Consistent with the results of last year’s survey, the majority of food and beverage executives (59 percent) expect their sector to recover ahead of the US economy as a whole. And they believe the timeline for a full US economic recovery, on average, is now 2.2 years away – which translates to June 2012. In last year’s survey, executives estimated 1.9 years for a US economic recovery.

When survey respondents were asked to identify the triggers they think will accelerate a US economic recovery, the top two factors cited were increased hiring from improved business conditions (70 percent) and improved consumer confidence (66 percent).

“While there is an uptick in the level of optimism this year from the food and beverage execs, they are pushing their recovery outlook even further out from last year’s predictions,” added Dolan. “These results illustrate that the economy will most likely not recover as rapidly as hoped, placing additional emphasis on food and beverage companies to continue to employ strategies to manage costs and improve productivity. Companies are trying to achieve sustainable margin improvement in the face of continuing challenging times.”

Executives thought the increased use of mobile Internet by consumers (39 percent) would most positively impact sector recovery followed by increased online shopping (34 percent) and increased outsourcing of technical/business procedures (28 percent). Overcapacity of store space was cited by 30 percent of the respondents as having the most negative impact on sector recovery.
Factors most likely to hinder economic recovery in their sector include continuing high national unemployment (64 percent), decreased consumer confidence (49 percent), and increased government regulation (34 percent).
In a related question, when asked about their current biggest expected challenges, the execs cited discounts driven by market competition (46 percent), recognizing/responding to customer needs/trends (11 percent) and increase in private labels (11 percent).