just-food’s first industry Confidence Survey came amid the toughest trading conditions for a generation. However, the results showed a level of optimism in the sector about the outlook for 2012. Nevertheless, consumers in many Western markets remain less confident about their own prospects and recent economic data is mixed at best.
There is no getting away from how challenging 2011 was for many in the food industry. Manufacturers and retailers spoke often about how tough the trading environment was last year.
Dalton Philips, chief executive of UK retailer Morrisons, said consumer confidence in this country was the worst in a generation.
Ken Powell, CEO of US food giant General Mills, has said the inflation in commodity prices over the last 12 months or so has been the highest he has seen in 30 years.
And there was a fall in food volume sales seen in a number of major markets last year. There was – for example – a decline in the number of food items consumers in markets including the UK and Germany were including in their weekly shop – an indication of the pressure on consumer spending and, therefore, on food manufacturers last year. In short, 2011 was a tough 12 months.
However, when the results of just-food’s confidence survey came in, the team was surprised at the level of optimism among the survey’s respondents.
It showed many of you believe trading conditions will not get worse in 2012. And, in fact, a significant proportion of you – over four in ten – believe the environment will improve this year.
This optimism is also shown in the responses to our question on the level of growth you expect to see in 2012. Almost nine in ten of you believe your business will grow in this year – and almost half expect it to grow by at least 5%.
Of course, top-line revenue growth is not the same as volume growth. And, once again, manufacturers will find it tough to increase volumes this year.
While our survey indicated a level of optimism among you about 2012, it is consumer confidence and how optimistic they are about their own prospects that will determine whether the optimism among many of you in the industry materialises into tangible results by the end of 2012.
Almost 40% of the survey’s respondents said they believed consumer confidence would improve this year.
However, looking at a number of indicators, the prospects for consumers and economies in many Western markets remains uncertain.
Last week, it was confirmed the UK economy had tipped back into recession. A 0.2% fall in GDP in the first quarter of 2012 confirmed fears of a double-dip recession.
Other figures added to the gloomy picture. Data published by UK retailer Asda and the Centre for Economics and Business Research claimed the disposable income of families in March was the joint-lowest level since November 2008.
And figures published by the British Retail Consortium showed food inflation in stores accelerated in March – putting more pressure on consumers – which will have an obvious impact on manufacturers.
On the other hand, a monthly index from UK building society Nationwide showed consumer confidence in March reached a nine-month high, although, it must be said, to a level far below the long-term average of the index.
Broadly speaking, it is difficult to draw a definitive verdict on consumer confidence. However, it appears incomes remain low and, with inflation stubbornly high, there is likely to be pressure on spending. And the headlines created by the UK GDP figures last week will hardly improve sentiment in the country.
Moving across the Atlantic and trying to determine whether overall conditions in the US are improving is just as problematic.
A survey of small business CEOs in the US, carried out by Vistage International, showed confidence had risen to the highest level in a year in the first quarter. An increasing number of firms, it said, were planning to hire more workers.
A survey from Thomson Reuters and the University of Michigan showed consumer sentiment improved in April compared to a month earlier. However, the index said US consumers’ assessment of their current conditions fell month-on-month, although their expectations for their future economic prospects were brighter.
Data for April from The Conference Board was mixed. It said US consumers were more positive about their present situation but said their short-term outlook had worsened with a more downbeat view on business and employment prospects.
Fewer consumers in the US, for example, believe there will be more jobs available in the months ahead, the board said.
In Europe, a European Commission survey issued over the last two weeks showed consumer and industry confidence in the euro area and the EU fell in April. Consumer confidence had increased in the first quarter but concern over the general economic situation hit sentiment in April.
In just-food’s confidence survey, we asked you the region on which you were least confident trading conditions would improve this year. Almost 74% of you said Europe. With unemployment in Spain at 24%, ongoing concern over Italy’s economy and the collapse of the government in the Netherlands (one of the few European countries with a AAA credit rating) after a row over fiscal policy, industry is right to be anxious over the Continent.
In short, there is a high degree of uncertainty about economic prospects in many Western markets. Consumers remain very cautious and in these markets at least the year ahead promises to be another challenging year for consumer goods companies.