US: "Stagflation" hurting FMCG companies - PepsiCo CFO Johnston
Developed markets are in "stagflation", according to PepsiCo chief financial officer Hugh Johnston
PepsiCo CFO Hugh Johnston has claimed a "stagflationary environment" is harming consumer product manufacturers.
Johnston, speaking at a Barclays Capital investor conference yesterday (7 September), said stagflation - or high inflation coupled with low economic growth – is forcing businesses like PepsiCo, which makes Frito-Lay snacks and Quaker oatmeal, to reassess their strategies.
"Clearly 2011 has been an interesting and challenging time for the entire industry. We are certainly facing extraordinary times, particularly in our developed markets," he said.
"If we look back to our prior communications, they are clearly based on a slow but steady consumer-led recovery in developed economies. It is clear now that developed markets have little growth – in fact we seem to be very much looking at a stagflationary environment."
He added that the combination of high raw-material prices and increasingly price-conscious consumers is forcing the entire food and beverage sector into difficult territory as they have to attempt to harmonise passing on price rises with budget-conscious customers.
"The stagflationary environment and a stressed consumer has created difficulties for the entire consumer packaged goods space. This stagflation has made pricing a tricky balancing act. However, the environment we currently operate in will not remain challenging forever. Currency markets will rebalance and the market consumer will recover," he said.
Johnston, meanwhile, said the global food and drinks giant would not be looking at any further acquisitions as its product portfolio was in a strong position.
He said: "This portfolio is where it needs to be, we don't see the need for large acquisitions in the near future."
PepsiCo's last major acquisition was secured earlier this year with the takeover of Russian dairy processor Wimm-Bill-Dann.
At the same conference, Kraft Foods chairman and CEO Irene Rosenfeld spoke of a "new normal" of stagnant growth in the US food industry.
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