The $6.5 Billion Margin Challenge In Consumer Products

Consumer products (CP) companies have been on a roller-coaster ride since the beginning of the pandemic. The latest post-pandemic twist arrived in late Spring 2022, when CP companies signaled price increases as a way of combating cost inflation. Surprisingly, they found a favorable environment for taking pricing action – consumer spending has remained resilient, and retailers have been amenable to accepting price increases (and passing them along to shoppers).

As such, most CP companies have posted significant revenue growth in Q3 2022. In Packaged Foods, for example, sales were up by 12.6% on average on a rolling 12-week basis as of October 2022, according to NielsenIQ data published by Goldman Sachs. Price increases of 17.6% were offset by a volume contraction of 4.2%. That performance is in sharp contrast to what was observed in the same period a year ago, which is more representative of the historical pre-pandemic norm in the Packaged Foods sector: sales were