Large consumer-goods brands need a 2021 playbook

January 4, 2021The consumer-goods industry as a whole has struggled to grow profits over the last decade, and large brands are generating less sales growth than small, medium, and private-label brands. Compounding the challenges, the industry has to deliver 35 percent more growth to meet investors’ expectations through 2030.

After outperforming for 40 years, large consumer goods brands struggled to grow profits over the last decade, hence they must deliver 35 percent more to meet investors’ expectations. (Infographic)

Infographic: What got us here won't get us there

After 40 years of outperformance, the consumer-goods industry struggled to grow profits over the past decade

Growth in average economic profit,¹ CAGR:

The rise in profit 1994–2009² was 10.8 percent
But the rise in profit 2010–2018³ was only 3.2 percent

Leading brands in each consumer-goods category have generated only 25% of growth

Sales growth⁴ across US by type of brand⁵

2016 sales:

Leading brands were 50 percent of total sales
Small/medium size brands were 32 percent of total sales
Private label brands were 18 percent of total sales

2016–2020 sales growth:

Leading brands generated only 25 percent of sales growth
Small/medium size brands generated 45 percent of sales growth
Private label brands generated 30 percent of sales growth

Investors expect a solution. Given historic and future market cap...

Aggregate market cap:

Recent performance from 2009–2019 was $2.5 trillion
Performance needed 2020–2030 is $3.2–3.6 trillion

...investors expect 35% more growth than the industry has delivered

Organic revenue growth:

Recent performance from 2009–2019 was 2.6 percent
Performance needed 2020–2030 is 3.5–4.0 percent

Notes

¹Survey of 167 global consumer-goods players.

²First year for which data are available.

³FY 2019 data were not available for most of sample (ie, those ending between July 2019 and June 2020).

⁴Measured by trailing 12 months ending in Apr of year listed (eg, 2016 = 12 months from May 2015 to Apr 2016). Includes food/grocery stores, drugstores, mass merchandisers, Walmart, club stores, and dollar stores for Nielsen-covered, stationary channels.

⁵Leading brands defined as top 3 brands in sales (by trailing 12 months) by subcategory (eg, dog food, whiskey, hair care), with small/medium-size brands defined as those remaining outside of private-label brands.

Source: Company reports; Nielsen; S&P Capital IQ; Corporate Performance Analytics by McKinsey; McKinsey analysis

McKinsey & Company

To read the article, see “A new model for the consumer-goods industry,” December 15, 2020.