Sector report: consumer

The broader consumer sector has been marked by a search for customer centricity, married with technological progress. Over the past decade, it has largely revolved around digital transformation and changing consumer preferences and behaviour. The covid-19 pandemic interrupted supply chains for a while and that can still be felt today. However, its disruptive force also helped to change consumer habits by boosting e-commerce businesses and hitting hard traditional brick-and-mortar retailers. As vaccines have been rolled out and the world is generally leaving the pandemic behind, we are still to see how many of those changes will remain permanent. Previous reports we have dedicated to this sector over the years have, on multiple occasions, stressed on the importance of demand side pressures on consumer products along with supply side disruption, thanks to the rise of e-commerce and the digitisation of retail. These general trends have only intensified with the pandemic and will likely continue to strengthen. Digitisation of the consumer sector has created the necessity to understand and interpret correctly consumer preferences by increasing one-on-one connections. The timely and massive monetary intervention of central banks in major world markets stalled the possibility of a severe recession with the outbreak of the pandemic but now the threat of rampant inflation is making monetary authorities take on a course of monetary tightening. That, coupled with some remaining supply chain disruptions, the current conflict in Europe and upward pressure in prices of many commodities, is likely to have a somewhat negative impact on discretionary spending in the short and medium term, which had kept its normal pace despite the pandemic and lockdowns. The potential menace of stagflation, as the one in the 1970s, is well on the agenda of economic policy makers around the globe now. The 2022 Consumer Products Industry Outlook report by consulting firm Deloitte reveals sentiment of top executives in the sector, based on a survey it has conducted. They seem to hold a largely positive and optimistic outlook: “As with last year, driving greater revenue is the top goal for executives in Deloitte’s 2022 outlook survey (93%). The “no-regret moves” companies undertook during the prior year’s uncertainty are paying off. And despite rising costs, at least half of consumer product companies surveyed expect their operating margins to increase. This coincides with an environment conducive to raising prices for end consumers, a large factor in why two-thirds of publicly traded companies are already reporting higher profit margins relative to pre-pandemic levels.”…

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