The CEO of any company that has experienced declining revenues for a while may be in jeopardy. When an entire business sector is in decline, many CEOs may be in jeopardy.
The latter is certainly the case when it comes to national-brand manufacturers of consumables.
In the past couple of years, no fewer than 16 CPG CEOs have vacated their corner offices. Conspicuous among them are Denise Morrison at Campbell Soup, Paul Grimwood at Nestle USA and Ken Powell at General Mills. And the list continues to grow. Indra Nooyi of PepsiCo recently announced she’s stepping down.
And it’s possible that we’ve seen only the beginning. Activist investors are now demanding major changes at 40 more CPG manufacturing companies worldwide, changes such as CEO replacement, asset sales or mergers.
Proximate reasons behind the recent CEO churn include pressure from activist investors, board unrest or ordinary retirements. But in all instances, the affected companies have been underperforming.
That’s the case across the sector. The top 25 food and beverage companies have been losing market share lately, chalking up annual sales growth averaging just 2 percent as compared to 6 percent for the balance of the industry.
In short: Branded goods are no longer as favored by consumers as they once were.
Younger consumers tend to see national brands as vestiges of times past. Conversely, they see private brands as conferring the status of possessing unique products secured at good prices. Retailers such as Kroger, Trader Joe’s, Whole Foods and Aldi cater to that.
Research suggests that younger shoppers are setting a trend that’s likely to continue into the future. Younger shoppers now account for 31 percent of all private brand dollar sales, counting all outlets, while older Millennials and younger Boomers contribute just 19 percent of dollar sales.
Assuming that younger shoppers’ preferences remain with them as they mature, the future of brands is apparent.
Now, returning to the CPG manufacturers, what can we expect of the new executives faced with these challenges?
Most likely they will continue to seek better ways to offer customer-preferred product, such as natural and organics. They can do that by changing current product formulations, rolling out new ones or acquiring relevant companies. But the benefits of those changes are a difficult consumer sell.
So the road for CPG manufacturers is a long one. None of this is to suggest that national brands are going away, but the challenges CPG brand owners face are growing.
For PLMA Live, I’m David Merrefield.