After last month’s CAGNY conference, the annual event that sees leading FMCG companies present to financial analysts in the US, the industry spotlight will next week pass to London, where the third Consumer Analyst Group of Europe conference will take place.
The Consumer Analyst Group of Europe, also known as CAGE, is an industry investment association for the consumer goods sector and was set up in 2009 by former equity analyst and ex-McCain Foods and Mars Inc executive James Amoroso.
On 19-21 March, the likes of Nestle, Unilever and Danone will be among major FMCG companies presenting at the third annual CAGE conference. The three companies will join the likes of Heinz, Irish consumer foods and ingredients manufacturer Kerry Group and Swiss chocolate giant Barry Callebaut in outlining how they are navigating some of the toughest trading conditions for a generation. Over 300 delegates representing the global consumer staples investment community and FMCG industry professionals from Europe, North America and countries as far afield as Australia, Singapore and South Africa are expected to attend – and just-food and sister site just-drinks will be providing exclusive media coverage of the event.
At last year’s event, many of the presenting companies struck a somewhat cautious tone, particularly on raw material costs, and, as we all know, manufacturers and retailers the world over had to deal with volatility in commodity prices in 2011. However, a more defining feature of 2011 was that, in some markets, notably, the UK and Germany, food sales volumes fell. And, in recent days, it has become clear that food manufacturers operating in the US have seen pressure on volumes in recent months as they have tried to push through price increases to offset commodity costs but, at the same time, have faced consumers who are extremely cautious with their spending.
To some, food manufacturers are operating, at least in the mature markets of the West, in very different trading conditions to those seen in recent years. “Frankly, it’s clear the industry is starting to confront the reality that the halcyon days of unfettered growth in developed markets is over,” Heinz chairman, president and CEO Bill Johnson said at the CAGNY conference last week.
At CAGE, the likes of Unilever CEO Paul Polman will likely face questions about they are dealing with that challenge. Underlying sales volumes from Unilever’s food division fell in 2011 and the consumer goods giant is facing questions over how it plans to revitalise that part of its business. Expect more of those questions at CAGE.
One might expect companies the size of Unilever, Danone and Nestle to have an element of pricing power that some smaller manufacturers do not enjoy. However, all companies are aware of the problem they face in markets like Europe and the US. Earlier this month, Danone said it expected its margins to be flat this year. CFO Pierre-André Terisse said the “difficult consumption context in Europe” would mean Danone needed to provide a “good level of support” to its brands. “We think it’s important we avoid any compromise if we want to keep delivering and building,” Terisse insisted.
Many of the presenting companies at CAGE will likely emphasise their presence in emerging markets. Danone and Nestle regularly point to the increasing proportion of their revenue that is now made in emerging markets and it can be expected that they, as well as Heinz and Kerry, will likely outline how they are continuing to build their businesses in developing countries in order to tap into new sources of growth.
Kerry last week announced the recent acquisition of a flavours business in South Africa, joining fellow CAGE attendee Barry Callebaut as companies that, in the early weeks of 2012, have struck significant deals in emerging markets. Last month, Barry Callebaut said it had secured a contract to supply bakery giant Grupo Bimbo in Mexico, just one of a number of notable supply deals and acquisitions the chocolate manufacturer has made already this year.
The price of cocoa is central to Barry Callebaut’s business and, at CAGE, agribusiness analysts from LMC International will discuss the short- and long-term trends in cocoa and coffee pricing. LMC is one of four research organisations on the CAGE conference programme. Kantar Wordpanel will outline the global retailing environment, Euromonitor will discuss the key trends in packaged food and Nielsen will look at the “structural transformation of private label”.
CAGE is fast becoming a key date in the industry calendar and this year’s conference will provide yet more key insight into how some of the largest food manufacturers are battling the challenges companies large and small are facing right now.