1. business and industrial

Food and Beverage
Industry Outlook
Survey:
Executives Plan to Spend and
Invest in Recipe for Growth
kpmg.com
KPMG’s Food and Beverage
Industry Outlook Survey
KPMG LLP, (KPMG) the audit, tax, and advisory firm, surveyed 103
C-suite and other top-level executives in the food and beverage
industry during the second quarter of 2012. Participants were asked
about business conditions in their sector, the most significant
revenue growth opportunities, and any barriers to growth that
may exist. They were also asked a variety of questions about
the economy, including factors they perceive might impede or
support their sector’s recovery, and to assess the impact advancing
technologies may have on their business model.
These responses were compared to the findings of a similar survey
conducted among food and beverage executives in the second
quarter of 2011.
© 2012 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member
firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 26471NSS
Foreword2
Key findings from KPMG’s 2012 Food and
Beverage Industry Outlook Survey
4
An increasing appetite for growth 6
Building on positive sector momentum
8
Challenging market factors
10
Data analytics and cloud computing
12
Exploring digital marketing channels
13
Risk and regulatory challenges
14
Economic outlook
15
Headcount 16
Final thoughts from KPMG
18
KPMG: A leader in serving the food and beverage industry
20
How KPMG can help
20
Contents
© 2012 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member
firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 26471NSS
2 | Food and Beverage Industry Outlook Survey
Foreword
© 2012 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member
firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 26471NSS
Food and Beverage Industry Outlook Survey | 3
Faced with a stagnant economy, food and beverage executives plan on investing more in new products
and technology, while seeking out merger and acquisition activity to fuel sector growth. Yet, due to
the current environment, companies will also likely need to keep their focus on eliminating costs and
improving operational efficiencies while placing an increased emphasis on talent management and
regulatory compliance.
Technology is expected to continue to play a vital role in food and beverage business strategies, with
many executives looking to increase their use of data analytics to gain customer insight, promote brands
and products, and make better pricing decisions. By embracing data analytics as a business imperative,
sector executives will likely be in a better position to gain a competitive advantage in the rapidly evolving
global digital economy. Meanwhile, the impact of social media and other digital marketing channels
continues to gain ground, being utilized more by food and beverage companies for brand promotion,
customer insight, and recruiting purposes.
In contrast to last year, this year’s results reveal an increasing awareness of the challenges presented by an
evolving regulatory landscape, with many executives reporting progress in proactively addressing regulatory
and risk-related issues. Additionally, they indicate a greater focus on talent management and retention
initiatives, citing a lack of qualified labor as a significant challenge to growth, leading to an increased focus
on compensation and training over the next year.
Overall, 2012 survey results reveal slow and steady sector progress as evidenced by revenue increases and
hiring activity over the last 12 months. Executives believe that such trends will continue, with modest gains
expected in these areas for the year ahead. However, respondents are less enthusiastic over the longer-term
outlook, with many pushing back their predictions for a complete U.S. economic recovery until 2014 or beyond.
On behalf of KPMG, I would like to thank those who participated in this survey. I hope the findings are useful
to you in addressing market challenges and opportunities. I also welcome the chance to discuss this study
and its implications for your business in the year ahead.
Patrick Dolan
National Line of Business Leader—Consumer Markets
KPMG LLP
© 2012 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member
firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 26471NSS
4 | Food and Beverage Industry Outlook Survey
Key findings from KPMG’s 2012 Food
and Beverage Industry Outlook Survey
KPMG’s survey reflects the responses of 103 food and beverage
sector executives from large, U.S.-based companies with $100 million
or more in annual revenue. Forty-two percent of respondents worked
for companies with annual revenue of $100 million to $1 billion, while
34 percent represented companies with annual revenue of $1 billion
to $10 billion, and 23 percent worked for companies with revenue
exceeding $10 billion. One percent represented companies with less
than $100 million in annual revenue. Sixty percent of these companies
are privately held, and 40 percent are publicly held.
© 2012 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member
firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 26471NSS
Food and Beverage Industry Outlook Survey | 5
Survey key findings:
• Sixty-eight percent of executives surveyed indicate that their companies have
significant cash on their balance sheet, up from 63 percent in 2011. The majority
indicate they will look to make investments over the next 18 months, while
27 percent say investment is already underway.
• More than half (59 percent) of survey respondents plan to increase capital spending
over the next year, with the highest-priority investment areas being new products
or services (39 percent), and the acquisition of a business (38 percent). In fact,
62 percent of executives believe their companies are likely to be involved in a
merger or acquisition in the next two years.
• Technology will be a key investment area, with 36 percent citing it to be a top
investment priority over the next year. Many acknowledge that technology, such as
data analytics and cloud computing, will help reduce costs, enhance interactions
with customers and suppliers, and accelerate time to market.
• Forty percent of executives cite operational improvements and making significant
cost reductions as top initiatives for their companies over the next two years.
Most point to pricing concerns and input costs as the most significant threats to
revenue growth and profit margins.
• This year’s survey results show greater attention toward regulatory changes,
with 67 percent reporting they are most concerned with how the Food Safety
Modernization Act may affect their businesses.
• Respondents indicate that they are more focused on talent management/retention
initiatives compared to last year’s survey results, with an increased emphasis on
compensation and training.
• More than half (57 percent) of executives surveyed say that revenue is up
from last year, and 72 percent expect revenue to continue to climb this year.
Similarly, 53 percent believe their companies will increase the number of
U.S. employees in the year ahead. However, 31 percent do not anticipate their
company’s headcount to ever return to pre-recession levels.
© 2012 KPMG LLP, a Delaware limited liability ©
partnership
2012 KPMG
andLLP
the
, aU.S.
Delaware
member
limited
firm liability
of the KPMG
partnership
network
andofthe
independent
U.S. member
member
firm of the KPMG network of independent member
firms affiliated with KPMG International Cooperative
firms affiliated
(“KPMGwith
International”),
KPMG International
a Swiss entity.
Cooperative
All rights
(“KPMG
reserved.
International”),
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6 | Food and Beverage Industry Outlook Survey
An increasing appetite for growth
In pursuit of growth, food and beverage companies will likely
look to ramp up investment and spend more over the next
year, particularly in the areas of new products, mergers and
acquisitions, and technology. With significant cash on their
balance sheets and many respondents reporting improved cash
positions over the last year, companies are well positioned to be
more aggressive to drive growth—organically and inorganically.
At the same time, challenging market factors will likely demand
that they not only focus on growth, but also continue to focus on
cost reduction and operational efficiency while maintaining an
emphasis on talent management and regulatory changes.
Capital spending and investing
Food and beverage companies have significant cash on their
balance sheets and are ready to invest. In fact, 68 percent of
survey respondents report that their company has significant
cash on its balance sheet, of which 27 percent acknowledge
that investment is already significantly underway.
Sixty-eight percent of respondents feel their company
has a great deal of cash on their balance sheets; and the
majority indicate they will look to make investments in
the next 18 months.
Among those whose companies have significant cash on their balance sheets
n = 70
Ready to spend
Moreover, 59 percent of survey respondents expect their
company’s capital spending will increase over the next year,
while 26 percent anticipate that it will stay the same.
The majority of respondents indicate an increase
in capital spending over the next year
30
20
27%
16%
26%
16%
8%
10
0%
0
Key




 Decrease by 1% to 5%
 Decrease by 6% to 10%
 Decrease by more than 10%
Increase by more than 10%
Increase by 6% to 10%
Increase by 1% to 5%
About the same
Q. What is the outlook for capital spending by your company over the next year?
Much of this spending will be in the areas of new products and
services (39 percent), acquisition of a business (38 percent),
and information technology (36 percent).
Developing new products or services and acquisitions
Continue to be the primary focus for capital spending
30
27%
20
20%
19%
39%
New products
or services
Acquisition
of a business
32%
38%
33%
13%
11%
10
6%
0
28%
33%
32%
23%
24%
Advertising
and marketing
Key
Investment is significantly under way
Third quarter 2012
Fourth quarter 2012
First quarter 2013
36%
Information
technology
Expanding
facilities
4%




7%
 Second quarter 2013
 Second half 2013
 2014 and beyond
23%
19%
Geographic
expansion
16%
13%
Research and
development
Q. What do you think is the most likely time frame for investment?
15%
15%
Business model
transformation
Employee
compensation
and training
13%
9%
0
 2012
10
20
30
40
 2011
Multiple Responses Allowed
Q. In which three areas do you expect your company to increase spending
the most over the next year?
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firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 26471NSS
50
Food and Beverage Industry Outlook Survey | 7
Pursuing M&A to fuel growth
Initiatives garnering attention
The sector will see continued merger and acquisition activity
according to most survey respondents. As part of their quest
for growth, 62 percent of the executives surveyed think it
is likely that their company will be involved in a merger or
acquisition either as a buyer or seller over the next two years.
Sixty-two percent of the executives surveyed
indicate their company will be involved in
M&A activity.
31%
30
26%
While investment in organic growth is a top
Initiative, 47 percent of the executives indicated
operational improvements and making significant
cost reductions to their top initiative.
24%
20
10
When asked about the top initiatives on the minds of
management, more than a quarter of survey respondents
cite the need to improve operational processes and related
technology followed by significant investment in organic
growth. Unlike last year, navigating significant changes in the
regulatory environment is clearly on the radar this year and due
to the increasing complexities surrounding regulation, will likely
garner more attention from management moving forward.
Significant improvement of
operationand financial processes
and related technology
7%
30%
23%
7%
5%
Significant investment in organic
growth (new product
development, pricing strategies,
geographic expansion)
0
22%
33%
Key
 Very likely (as a buyer)
 Somewhat likely (as a buyer)
 Very likely (as a seller)
 Somewhat likely (as a seller)
 No plans for M&A activity
 Not sure/Don't know
Q. What is the likelihood that your firm will be involved in a merger/acquisition
in the next two years?
17%
Significant cost
reduction initiatives
18%
14%
Merger/acquisition
13%
9%
Significant changes in
business model
12%
4%
Strategic divestiture
of current assets
1%
Navigating significant changes
in the regulatory environment
4%
0%
0
 2012
10
20
30
40
50
 2011
Q. What is the top initiative from a management perspective for the next two years in
terms of energy, time, and resources?
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firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 26471NSS
8 | Food and Beverage Industry Outlook Survey
Building on positive sector momentum
Most executives believe the food and beverage sector will
continue to grow over the next year. Eighty-two percent of
survey respondents expect sector growth during the next year,
of which 60 percent predict only gains of about 10 percent
or less.
Similar to the 2011 survey, respondents anticipate
sector growth to be 1–5 percent over the next year.
70
Over half of the respondents report their company’s
revenue is higher compared to one year ago
60%
60
Revenue growth
Most food and beverage companies saw revenue rise during
the last 12 months. Fifty-seven percent of survey respondents
report an increase in revenue over the last year, while 35 percent
remained the same. Interestingly, these results fell short of the
executives’ expectations in last year’s survey, in which 68 percent
expected higher revenue in 2012, while 27 percent predicted they
would remain flat.
Mean
2012: 3.6
50
40
50
30
40
13%
10
5%
0
20
4%
0%
1%
Key




Increase by more than 10%
Increase by 6% to 10%
Increase by 1% to 5%
No change
35%
30
17%
20
47%
10
10%
8%
0%
0
 Decrease by 1% to 5%
 Decrease by 6% to 10%
 Decrease by more than 10%
Significantly Moderately About higher
higher
the same
Moderately Significantly
lower
lower
 2012
1 = Significantly worse and 5 = Significantly improved
Q. What do you estimate your industry’s growth rate will be over the next year?
Q. Compared with this time last year, how would you describe your company's
current revenue?
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firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 26471NSS
Food and Beverage Industry Outlook Survey | 9
Looking ahead this year, executives expect revenue to continue
its upward climb. When asked to describe their revenue
expectations a year from now, 72 percent of executives predict
that revenue will increase, while 24 percent believe revenue
will stay flat.
Respondents anticipate revenue to be moderately
higher one year from now.
Mean: 3.8
58%
60
It’s all about the customers
Retaining and adding customers remains the key to driving
revenue growth in the food and beverage sector, according to
47 percent of executives surveyed. Other top revenue drivers
cited by respondents include expansion in core and new markets
(38 percent) and product innovations (29 percent). These results
were in line with the responses from last year’s survey.
Executives indicate retaining and adding new customers,
expansion in core and new markets, and product
innovation to help drive growth.
50
47%
Retaining and
adding
customers
40
41%
30
24%
38%
Expansion in core/ new markets
20
33%
14%
10
4%
0
0%
29%
Product
innovations
30%
Key
 Significantly higher
 Moderately higher
 About the same
 Moderately lower
 Significantly lower
1 = Significantly worse and 5 = Significantly improved
22%
Improving
economic
conditions
26%
Q. What do you expect your company's revenue to be like one year from now?
21%
Increasing
consumer
spending
22%
0
10
 2012
20
30
40
50
 2011
Multiple responses allowed
Q. What do you believe will be the biggest drivers of your company's revenue growth
over the next one to three years?
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firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 26471NSS
10 | Food and Beverage Industry Outlook Survey
Challenging market factors
Despite the momentum and growth investments food and beverage has
experienced over the past year, executives point to costs of inputs and discounting
as the most significant threats to profit margins, with regulatory compliance
becoming an increasing threat as well.
Q. Which of the following items pose the greatest threat to your company’s profit margins in the next 12 months?
2012 Top 5 threats to profit margins
2011 Top 5 threats to profit margins
1. Costs of inputs or merchandise
1. Costs of inputs or merchandise
2. Discounting and other sales incentives
2. Discounting and other incentives
3. Decreased sales volumes
3. Decreased sales volumes
4. Regulatory compliance
4. Administrative and marketing costs
5. Inventory carrying costs
5. Regulatory compliance
Overcoming growth obstacles
Meanwhile, similar themes resonated when considering obstacles toward achieving
growth. Pricing pressures, volatile commodity/input prices, and a lack of consumer
demand rounded out the top three answers listed as the most significant growth
barriers over the next year. Notably, a lack of a qualified workforce is a growing
concern for the industry as indicated by this year’s results over last year.
Q. Which of the following are the most significant growth barriers facing your company over the next year?
Top Growth Barriers – 2012
Top Growth Barriers – 2011
1. Pricing pressures
1. Pricing pressures
2. Volatile commodity/input prices
2. Volatile commodity/input prices
3. Lack of customer demand
3. Labor costs
4. Labor costs
4. Lack of customer demand
5. Energy prices
5. Energy prices
6. Lack of qualified workforce
6. Regulatory and legislative pressures
7. Regulatory and legislative pressures
7. Inflation
8. Inflation
8. Lack of a qualified workforce
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firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 26471NSS
Food and Beverage Industry Outlook Survey | 11
Strategies to combat costs
Volatile merchandise costs continue to create a variety of
challenges for food and beverage companies. To help combat
these costs, 67 percent of executives report optimizing sales,
general and administrative (SG&A) and supply chain costs, while
53 percent are implementing commodity hedging strategies.
Over half of the respondents have implemented some
form of hedging strategies for commodities to help
combat the impact of volatile input costs on margins.
80
70
50
40
30
20
Decreased consumer confidence and high national
employment continue to hinder
i
sector growth.
58%
Decreased
consumer
confidence
67%
60
Factors hindering recovery
More than half of survey respondents view decreased consumer
confidence (58 percent) and the continued high national
unemployment rate (52 percent) as the two top factors hindering
the food and beverage sector’s recovery. Other top factors cited
include increased government regulation (30 percent) and the
distressed real estate market (17 percent).
57%
53%
41%
22%
52%
Continued high
national
unemployment
59%
18%
10
0
30%
Increased
government
regulation
Key
 Optimizing SG&A and supply chain costs  Enhancing trade spend efficiency
 Hedging strategies for commodities
 Revisiting service delivery models
 Customer-centric pricing strategies
(offshoring/shared services)
Multiple responses allowed
Q. What strategies has your organization implemented to help combat the
impact of volatile input costs on margins?
24%
17%
Distressed
real estate
market
19%
Limited
access to
credit for
consumers
16%
12%
0
10
20
 2012
30
40
50
60
 2011
Multiple responses allowed
Q. What are the top factors most likely to hinder sector growth?
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12 | Food and Beverage Industry Outlook Survey
Data analytics and cloud computing
More and more companies are realizing the value of data
analytics to support strategic decision making throughout the
organization. In fact, nearly two-thirds (65 percent) of survey
respondents say that data analytics play a key role in helping
provide customer insight, as well as in the areas of brand and
product management (57 percent) and in pricing decisions
(54 percent).
Respondents indicated they use some form of
data analytics to help gain insight on customers,
brand, and product management and to help
make pricing decisions.
One out of five respondents indicate their data
analytic capabilities are behind their competitors
40
36%
30
80
22%
70 65%
60
However, when asked to describe the organizational maturity
regarding usage of data analytics, more than half of executives
rate their company’s data analytics literacy as average or behind
their competitors. Meanwhile, 22 percent admit that they’re
rapidly moving toward high analytical literacy, and 17 percent
say they are already there.
57%
20 17%
54%
50
40
39%
10
38%
32%
30
20%
0
2%
3%
20
Key
10
0
Key
 Customer insight
 Brand and product management
 Pricing decisions
 Market expansion
 Operating model optimization
 Portfolio rationalization
Multiple responses allowed
Q. In what areas does your organization use data analytics to help support
strategic decision making?
 My company has high data analytics literacy
 My company is rapidly moving toward becoming
an enterprise with high analytical literacy
 My company is about average when it comes to utilizing analytics,
and our management team and workforce have an average analytical literacy
 My company has some data analytics capabilities, but at the moment
we are behind our competitors when it comes to utilizing analytics,
and our management team and workforce have average to low analytical literacy
 My company has no formal data analytics capabilities, and our
management team and workforce have low analytical literacy
 Don't know
Q. Which of the following best characterizes the data analytics maturity of your company?
Cloud computing
Respondents indicate cloud offers many advantages, including reduced costs, accelerated time to market, and increased
interaction with customers/suppliers. Yet, when asked, the potential of adopting cloud usage in their companies over the
next three years, survey respondents cite cost and technology complexity as key challenges.
Q. Which of the following best describe the potential impact of cloud computing on your business model/operations?
Q. What do you see as the biggest challenges for your business to adopt cloud usage in the next three years?
Top 5 Cloud adoption benefits
Top 5 Cloud adoption challenges
Change interaction with customers/
suppliers
Cost
Reduce costs
Technology complexity
Accelerate time to market
Security/privacy governance
Greater transparency on transactions
Measuring return on investment
Fundamentally change business model
Displacement of existing tech roadmap
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Food and Beverage Industry Outlook Survey | 13
Exploring digital marketing channels
As food and beverage companies explore new ways of
doing business and reaching more customers, 63 percent
of survey respondents acknowledge that social media is
having a significant impact on the industry. Other digital
marketing channels are also making their mark, including e-mail
campaigns (31 percent) and mobile promotions (23 percent).
Social media continues to have the most significant
impact on business as it relates to digital
marketing channels.
70
60
52%
50
51%
36%
34%
29%
30
50
30
Use of social media, mobile technology, and digital media
40
63%
60
40
Food and beverage executives plan to use digital, social,
and mobile technologies in a variety of ways over the next
12 months. In fact, 52 percent have plans to use social
media for external brand promotion, and 51 percent will use
social media to gain customer insight.
19%
20
31%
23%
20
10
0
18%
20%
10
18%
13%
9%
0
Social Media
Key
Multiple responses allowed
Digital
Media
Q. Which of the following digital marketing channels is having a significant
impact on your business?
Mobile
Technology
 Online shopping
 Mobile payments
 Mobile shopping
Social
Media
Key
 Social media (Facebook, Twitter, etc.)
 E-mail campaigns
 Mobile promotions
27%
25%
Mobile Technology
Digital Media
Social media for external brand promotion
Social media for customer insight
Social media for recruiting
Social media for two-way customer engagement
Customer-facing mobile applications
Mobile-specific, customer-facing web sites
Enterprise mobile applications
Location-based marketing using mobile technology
Creation and distribution of digital media marketing messages
using video (including company-specific external video channels)
 Creation and distribution of digital media internal messages using video









Multiple responses allowed
Q. How is your company planning to use digital/social/mobile technologies over the
next year and for what purpose?
© 2012 KPMG LLP, a Delaware limited liability ©
partnership
2012 KPMG
andLLP
the
, aU.S.
Delaware
member
limited
firm liability
of the KPMG
partnership
network
andofthe
independent
U.S. member
member
firm of the KPMG network of independent member
firms affiliated with KPMG International Cooperative
firms affiliated
(“KPMGwith
International”),
KPMG International
a Swiss entity.
Cooperative
All rights
(“KPMG
reserved.
International”),
26471NSS a Swiss entity. All rights reserved. 26471NSS
14 | Food and Beverage Industry Outlook Survey
Risk and regulatory challenges
Evolving regulation and changing marketplace dynamics have
added to the need for companies to implement a strong internal
risk framework. When asked to identify any existing challenges
preventing the adoption of a formal risk policy, half (53 percent)
of survey respondents believe culture and behavior pose
significant obstacles.
Half of the respondents feel that their company’s
internal culture and behaviors are the main
challenges to adopting a risk policy.
The Food Safety Modernization Act has attracted the greatest
regulatory focus as indicated by 67 percent of the food and
beverage executives surveyed.
Sixty-seven percent of respondents indicate that they
are most focused on the Food Safety Modernization
Act in terms of regulations and mandates.
80
67%
60
Culture and
behavior
50%
50%
42%
40
29%
Process integration/
efficiency of
operations
31%
21%
20
29%
6%
Clearly defined
roles and
responsibilities
0
28%
35%
Key
18%
Multiple responses allowed
Q. What regulations and mandates is your organization most focused on?
18%
Governance
framework
8%
Taxing regulation
Survey respondents also note that evolving tax regulation may
impact their business strategy, with 28 percent believing it will
result in less capital investment.
10%
Don’t know
18%
0
10
 2012
20
 Labor/immigration Laws
 Dodd-Frank conflict minerals
 Food Safety Modernization Act
 Healthcare reform
 Product recalls
24%
Shared resources
across the
organization
30
40
50
60
 2011
Multiple responses allowed
Q. What challenges exist within your organization that might stand in the way of a formally adopted risk policy?
Over one in four executives indicate that evolving
federal tax policies are having an impact on capital
investments and hiring.
28%
Less capital
investment
32%
27%
Changing business
structure/
Impact to hiring
14%
16%
Increased
overseas
expansion
24%
12%
Increased
domestic
expansion
6%
10%
Increased M&A
(mergers and
acquisitions) activity
17%
33%
Don’t know
31%
0
 2012
10
20
30
40
 2011
Multiple responses allowed
Q. How will evolving federal tax policy impact your organization's business strategy?
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50
Food and Beverage Industry Outlook Survey | 15
Economic outlook
Executives believe that modest improvements in U.S. business
conditions will continue but have pushed back their estimated
time line for economic recovery to 2014 or later, with concerns
that decreased consumer confidence, continued high national
unemployment, and increased government regulation are
hindering a full U.S. economic recovery.
Business conditions
More than half (56 percent) of food and beverage executives
surveyed believe that U.S. business conditions will improve in a
year’s time. These results closely mirror the results from 2011,
when 54 percent anticipated economic conditions to improve in
a year’s time.
Executives expect improved U.S. business
conditions one year from now.
U.S. economic recovery
Taking a broader view, hopes for a substantial U.S. economic
recovery seem to have been pushed back for at least another
full year, according to the food and beverage executives
surveyed. While 40 percent predict that it is possible for
2013, more than half (59 percent) believe it will take longer to
achieve. Twenty-eight percent anticipate a full recovery in 2014,
while 31 percent predict it will take until 2015 or beyond.
Executives expect the time line for overall
U.S. economic recovery to be delayed by one full year.
40
29%
30
Mean: 3.4
28%
31%
60
20
52%
50
40
11%
10
28%
30
0
20
Key
14%
10
4%
2%
0
 End of 2012
 First half of 2013
 End of 2013
 End of 2014
 End of 2015 or later
Q. When do you think the U.S. economy as a whole will recover?
Recovery will be substantially complete by:
Key
 Significantly improved
 Moderately improved
 About the same
1%
 Moderately worse
 Significantly worse
1 = Significantly worse and 5 = Significantly improved
Q. A year from now, what are your expectations for the U.S. economy?
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16 | Food and Beverage Industry Outlook Survey
Headcount
Companies in our survey added more U.S. employees over the
last year, with 50 percent of respondents reporting an increase
in headcount, a significant jump from 2011 results, which
reported a 35-percent increase in personnel.
Executives anticipate improved employment
conditions for their companies one year from now.
Fifty percent of the executives indicate
employment is higher for their companies
compared to one year ago.
Increased
by more
than 6%
Furthermore, food and beverage executives expect the hiring
momentum to continue, with 53 percent of respondents
predicting they will add employees over the next year, up from
46 percent that held these expectations the previous year.
30%
30
12%
30%
8%
20
13%
Increased
by 4% to
6%
15%
6%
10
11%
12%
25%
Increased
by 1% to
3%
21%
0
Increase
by more
than 6%
25%
About the
same
35%
Increase
by 4%
to 6%
Increase
by 1%
to 3%
21%
4%
Almost two-thirds of respondents indicate
employment has not returned or
may never return to pre-recession levels.
3%
0%
Not sure/
Don't
know
0%
0
 2012
Not sure/
Don't
know
Notably, 30 percent of survey respondents said that their U.S.
headcount has already reached or is greater than pre-recession
levels, but 16 percent think that it may never return to those levels.
6%
Decreased
by more
than 6%
Decrease
by more
than 4%
Q. How do you expect your company's U.S. headcount to change one year from now?
4%
Decreased
by 4% to
6%
Decrease
by 1%
to 3%
1%
 2012
17%
Decreased
by 1% to
3%
About
the same
1%
10
20
30
40
30
30%
 2011
Q. Compared with this time last year, how would you describe your
company's current U.S. headcount?
20%
20
16%
11%
10
4%
13%
6%
0
Key




Already at pre-recession levels
Second half of 2012
First half of 2013
End of 2013
 End of 2014
 End of 2015 or later
 Not at all
Q. When do you expect your company's U.S. headcount to return to pre-recession levels?
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Food and Beverage Industry Outlook Survey | 17
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18 | Food and Beverage Industry Outlook Survey
Final thoughts from KPMG
Food and beverage executives indicate the biggest expected
challenges in coming months include the ability to recognize and
respond to customer needs and trends, responding to market
competition, and managing the volatility of the price of raw
materials. The sector as a whole is still challenged by continued
high national unemployment and decreased consumer
confidence, including limited ability to gain access to capital and
increased government regulation. Executives tell us that they do
not feel that employment has fully turned around in the sector
and there is a mixed reaction as to what the job picture may look
like next year.
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Food and Beverage Industry Outlook Survey | 19
Growth in a stagnant economy
However, there are opportunities for growth, including responding
to the new economic, social, and technological dynamics
impacting the industry. Executives indicate that a key revenue
driver over the next few years for the industry will be product
innovations, both in services and in branding and promotion.
We continue to see a shift towards customer and supplier
collaboration which is allowing a better understanding of the
needs of consumers as well as helping to share potential
risks, costs and rewards throughout the supply chain, and
more importantly, accelerating the speed to market.
Inorganic growth, such as acquisitions, are offering a faster
route to growth for some organizations than home-grown
innovation as evidenced by the two-thirds of respondents
who indicated that their company will be involved in a
merger or acquisition over the next two years, with much of
that expansion fueled by the significant cash reserves that
companies have built up.
Companies in the industry also have an opportunity to leverage
the change in U.S. demographics and focus on specialty trends,
such as and organic food and beverage products, ethnic foods,
and products considered to help promote health and wellness.
Companies taking advantage of these niche segments are
hoping to help increase share-of-wallet and top line revenues
in an otherwise slow-growth market.
Leveraging the use of technology, such as the use of cloud
computing, business intelligence tools, and social media could
be a strategic way of gathering information to refine customer
segmentation and marketing efforts. In addition to providing
visibility to customer insight, access to “big data” is providing
executives with insight to help optimize operating models and
rationalize portfolios, as well as revealing information related to
new markets and pricing strategies.
Rebuilding business models and operations to
improve margins
While growth seems to be a top initiative for food and
beverage companies, executives continue to focus on cost
reductions and identifying ways to streamline operational
and financial processes. In our experience, budget cutting
can take organizations only so far. To sustain working
capital improvements, companies need to consider deeper,
more systemic changes to drive down costs and increase
standardization. Food and beverage companies are demanding
more of technology to help automate processes as well as
improve supply chain transparency and agility.
Companies in our sector are also exploring strategies to help
deal with rising input costs and the impact to margins, including
implementing hedging strategies, working with retailers
to enhance trade spend efficiencies, and revisiting service
delivery models such as creating shared service centers and
offshoring a variety of back office functions.
Managing risk and addressing regulation
This year’s survey results also indicate companies are
proactively addressing changes in the regulatory environment,
such as the Food Safety Modernization Act, as well as federal
tax policies and healthcare reform. They are also proactively
addressing risk management-related issues. Food and
beverage companies have an opportunity to take advantage
of tax cash savings and available government credits and
incentives to benefit the bottom line. Examples include
exploring state and local incentive opportunities for expansions
and relocations; capturing eligible R&D tax credits and tax
credits related to supporting energy-saving; or environmentally
sensitive upgrades to facilities, physical plant, and equipment.
Attributes of successful companies
Key priorities for companies in the industry will be to create
a customer-facing organization through value differentiation,
growth and innovation, and better channel management.
Also, companies will need to streamline and standardize key
processes such as creating an optimized supply chain while
implementing effective risk management practices. We believe
that companies that will succeed in the long run will be those
that have a true understanding of who their customers are
and what they want, as well as those who develop a strong
brand that provides clear positioning in the marketplace and
differentiation in the eyes of the consumer.
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20 | Food and Beverage Industry Outlook Survey
KPMG: A leader in serving the
food and beverage industry
Food and beverage companies continue to face a demanding market environment
that requires them to actively manage change that may impact sales and
performance. Having the right professional services firm is critical to addressing
these challenges and achieving financial goals. KPMG in the United States is a
leading accounting, tax, and advisory firm for the consumer markets industry and
working with our network of member firms, we serve clients worldwide. Our Food,
Drink, and Consumer Goods practice is comprised of accomplished professionals,
from top food, drink, and consumer goods companies that possess the knowledge,
experience, and skills necessary to sort through today’s complex business problems.
By developing insights into industry trends and approaching market opportunities
with a fresh perspective, we offer company-specific guidance that helps our clients
become or remain market leaders.
How KPMG can help
Audit Services
Financial Statement Audit
Audits of Internal Controls over
Financial Reporting
Other Attestation
Tax Services
Federal
Economic and Valuation Services
International Corporate Services
International Executive Services
Mergers and Acquisitions
State and Local
Advisory Services
Management Consulting
Business effectiveness
Financial management
IT advisory
Operational strategy
People and change
Risk Consulting
Accounting advisory
Financial risk management
Forensic
Internal audit, risk, and compliance
IT advisory
Transactions & Restructuring
Corporate finance
Restructuring
Transaction services
© 2012 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member
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Food and Beverage Industry Outlook Survey | 21
© 2012 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member
firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 26471NSS
Key contacts
Patrick Dolan
National Line of Business Leader
Consumer Markets
T: 312-665-2311
E: [email protected]
Mike Hughes
National Account Leader
Food, Drink & Consumer Goods
T: 312-665-1933
E: [email protected]
Brian Hegarty
National Audit Leader
Food, Drink & Consumer Goods
T: 212-872-2121
E: [email protected]
Tom Theodoropoulos
National Tax Leader
Food, Drink & Consumer Goods
T: 212-872-6594
E: [email protected]
Anne Giometti
National Marketing Director
Consumer Markets
T: 312-665-2922
E: [email protected]
Raman Kansal
National Line of Business Director
Consumer Markets
T: 312-665-3623
E: [email protected]
kpmg.com
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of the date it is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate
professional advice after a thorough examination of the particular situation.
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