FAM Funds Research Analyst Kevin Gioia, CFA
FAM recently attended the CAGNY (Consumer Analyst Group of New York) 2019 Conference where some noteworthy trends in the consumer-packaged goods space were identified:
- Competitive Landscape: More educated consumers are demanding higher nutrition and more natural food products, along with increased convenience. Smaller companies, as well as private label (store brands), have been able to innovate much faster to meet these demands.
- Industry Response: Legacy competitors have sought to reposition products with innovations in health & wellness and packaging, while also looking to acquire smaller, faster-growing companies.
- Cost Management: Packaged good manufacturers are evaluating every step of the supply chain to identify waste with a goal of investing savings into growth initiatives.
- Marketing Innovation: There are innovations in packaged goods marketing including tying products to a social cause (e.g., environmental sustainability or public health). In addition, companies are shifting spending to digital channels with many now allocating more than half of their marketing budget to e-commerce.
- FAM Perspective: Trends aside, people want good tasting food. Our holdings in the space include a spice manufacturer that is innovating in sustainable production practices, supply chain transparency, and recyclable packaging. Another position is in a snack food provider that has deployed an asset-light approach to free up capital for innovation.
4Q18 earnings for both companies reflected the success of these innovation efforts, which should support attainment of our longer-term performance objectives for growth in market share and/or same-store sales.