World's top 250 consumer product companies achieve sales over $2.64 trillion: Deloitte study
16 Feb 2008
New York: Total sales for the top 250 consumer products companies exceeded $2.65 trillion in fiscal 2006, according to the inaugural Global Powers of Consumer Products Industry report from Deloitte.
According to the report, sales grew by 8.4 per cent for the year, although 16 per cent of the companies actually experienced declining sales.
Over a quarter (28 per cent) of total sales were concentrated among the 10 largest companies, which reported combined sales of $751 billion. These companies grew slightly more than the average, at 8.6 per cent, and were particularly strong when it comes to turning sales into profit. The Top 10's average profit margin of 7.4 per cent compares favorably with 6 per cent for the group as a whole.
North American companies dominate the list in terms of numbers and size, with 94 North American companies in the Top 250 with average sales figures over $11 billion, the largest average of any of the regions. However, these companies also experienced the slowest sales growth at 7.4 per cent.
Companies in Africa and the Middle East grew fastest at 14.3 per cent, followed by those in Asia Pacific (8.9 per cent), Europe (8.8 per cent) and Latin America (8.5 per cent).
Dr Ira Kalish of Deloitte Services LP, Deloitte Research's Consumer Business Director, said, "US companies are operating in a mature market, while those companies in emerging markets are growing rapidly off a smaller base. The challenge for companies from the US and Western Europe will be to identify markets in which to generate new growth. There is a shift in the balance of consumer spending globally. As the level of disposable income increases amongst the new middle classes from emerging nations, global consumer products companies may reap the benefit. Those most reliant on 'old world' markets may see a period of tightening."
Consolidation
In recent years there has been some consolidation in the retail sector, resulting in a smaller number of very large retailers. These companies are able to operate at a scale where they can diversify their offerings, producing private label goods across a wide range of product sectors. Kalish said, "It is likely that this trend will result in consolidation among consumer products suppliers. The consumer products sector is moving to a position where there are too many suppliers in the market. One solution would be for suppliers to consolidate and rationalize their offerings."
Global leaders
Seven of the top 10 companies in 2006 are electronics manufacturers. Hewlett Packard Company (Hewlett-Packard) is the largest electronics manufacturer, closely followed by South Korea's Samsung Electronics Co., Ltd. (Samsung Electronics).
Altria Group Inc. (Altria) was the world's largest consumer products company in 2006. However, this has already changed as the tobacco giant spun off its Kraft Foods division in March 2007. Altria also plans to spin off its fast-growing Philip Morris International arm, at which point the company is expected to drop out of the Top 10.
Top 10 consumer products companies*:
| Company | Country of origin | Rank | FY06 net sales ($ million) | FY06 sales growth |
| Altria | US | 1 | 101,407 | 3.6 |
| Hewlett-Packard | US | 2 | 91,658 | 5.7 |
| Samsung Electronics | South Korea | 3 | 90,551 | 5.9 |
| Nestle SA | Switzerland | 4 | 78,625 | 8.1 |
| Matsushita Electric Industrial Co., Ltd | Japan | 5 | 77,966 | 2.4 |
| The Proctor & Gamble Company | US | 6 | 76,476 | 12.1 |
| Sony Corporation | Japan | 7 | 64,777 | 13.1 |
| Toshiba Corporation | Japan | 8 | 60,916 | 12.2 |
| Dell Inc. | US | 9 | 57,095 | 2.1 |
| Nokia Corporation | Finland | 10 | 51,657 | 20.3 |
| *A number of sources were consulted to develop the Top 250 list and the other tables and charts in the Global Powers of Consumer Products Industry report. Whenever possible, data was taken from annual reports, 10-Ks, press releases, or other company-supplied information sources. Other sources include Hoovers, Factiva, OneSource, Amadeus, and Forbes Largest Private Companies List. | ||||
Leisure goods companies grow most quickly
According to the report, leisure goods companies are growing at the greatest rate. The average net sales growth for this sector was 15.5 per cent. Indeed, the fastest growing company in the Top 250, Nintendo Co., Ltd. (Nintendo), saw net sales grow by an impressive 90 per cent in 2006.
Kalish added, "Nintendo made great progress expanding gaming to the masses in 2006, reversing a long decline in the hand-held video game industry. The company has seen strong performance of both Nintendo DS and Wii. For Christmas 2007, the Wii was one of the most desired gifts and flew off the shelves."
Food, Drink and Tobacco (FD&T) was the largest group with 123 companies in the Top 250, but it was also the group growing most slowly at 5.6 per cent in 2006. Kalish added, "FD&T companies are not going to see particularly strong growth because consumers have reached a point where they are already buying as much of the essentials as they need. The real potential for growth comes in those sectors where products are discretionary. This year has seen tremendous growth for fashion, electronics and leisure goods companies. As consumers become more affluent they are spending more of their discretionary spend on non-food items."
Home improvement products most profitable
According to the report, the most successful sector in terms of profitability was the Home Improvement Products group, although Kalish noted, "The recent downturn in the US housing market may adversely affect profitability in the sector in the near future." On average, the 13 companies in this sector had a profit margin of 9.7 per cent. Companies in the Tires sector had the lowest profit margin, actually experiencing a negative average net profit margin at -0.9 per cent. The second-lowest profit margin (3.3 per cent) was found in the highly competitive electronic products sector which includes consumer electronics manufacturers, many of which provide products for businesses as well as consumers.
The 50 fastest-growing companies
In 2006, sales at the 50 fastest-growing consumer products companies grew by 25 on average, three times the Top 250's 8.4 per cent rate. Looking only at the top 10 fastest-growing companies, sales surged by over 45 per cent.
Kalish said, "A focus on innovative new products resulted in strong growth for several of the companies in the Fastest 50 list. For example, companies like Research in Motion (Blackberry wireless), SanDisk (flash memory products), Apple (iPod, iTunes, iPhone) and Red Bull (energy drinks) all experienced sales growth in excess of 25 per cent."
Geographically, companies based in emerging markets grew rapidly, as would be expected. Both of the India-based manufacturers on the Top 250 list are among the Fastest 50, as are three of the five Chinese companies and two of the four Taiwanese firms. In addition, nearly one-third of the UK firms made the list of fast-growing companies.
Kalish observed, "There are a number of reasons for this, some of which may simply be M&A activity and a strong currency, but it is also the case that the UK has a large number of high performing consumer products companies. UK companies in the Fastest 50 grew by 10and saw net profit margin of 9 per cent, significantly higher than the average."
