Kanika Talwar
7 min read
The consumer products market is currently at a critical crossroads. Confidence within the industry continues to decline given the cost of living, the volatile nature of the economy and an uncertain political landscape. And now, even the ultra-wealthy who have been the primary drivers of luxury spending despite the slump, are losing interest.
EY’s recently published inaugural State of Consumer Products report looks at the challenges the consumer products industry faces and how doubling down on investment and innovation is the path forward in this fast-paced market. One main takeaway from EY’s report is that retail firms must build resilience by reclaiming their brand relevance to survive the ultra-competitive and turmoil-riddled market of today.
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The study surveyed more than 500 consumer product manufacturers and retailers, more than 20,000 consumers and 190 global consumer product chief executive officers. The report also spoke at length with 24 key industry executives.
The report’s authors noted that the consumer products industry has had massive shifts in three core relationships. Consumers expect “sharper value from brands,” distinction and innovation. Consumers are expecting personalized marketing that makes them feel seen and heard. For the retailers, they are looking for valuable partners to grow in their respective categories across various channels. From their partners, retailers are looking for those who can “execute excellence” and use data to drive growth. For capital markets, the investment community is looking for consumer product companies to showcase their strategic focus, operational capabilities, performance and cash flow to be a desired asset.
With the evolving landscape that consumer products brands now find themselves in, investors and their expectations are seeking out those with steady and reliable performance. Sixty-five percent of consumer product executives said that investor expectations are becoming a larger influence on their business strategies. Now, more than ever, leaders are looking to M&A to help drive their next phase.
While 81 percent of consumer products leaders polled hold the belief that valuation gaps will hinder M&A recovery over the next quarters, consumer product firms are accelerating their review of their M&A portfolios and their growth strategies to better position themselves to capture new markets and segmentations.
