Wrigley, for example, has delivered annualized revenue growth of 8 percent for the past 10 years, and grown operating income by 9 percent a year - impressive in almost any industry and nearly double the CPG sector’s average growth rate of 4.7 percent. Indeed, the difference between growth leaders and laggards can be stunning. Most consumer products companies that have grown more have accomplished the feat by acquisition.īut the real surprise isn’t that most CPG companies barely have managed to run with a very slow pack. Most CPG companies say they anticipate top-line growth of only 3 to 5 percent annually, and profit growth of 8 to 12 percent, generally premised on new rounds of cost cutting. Top-line growth in the industry often is an optical illusion, barely keeping pace with the “natural” growth rate - population growth plus the rate of inflation. Unilever and Colgate are among the other giants punished by shareholders for revenue and earnings growth deemed disappointing. If Gillette is taking it on the chin despite a long-term initiative aimed at turning innovation into growth, so are many of its consumer packaged goods (CPG) peers. Over the long term, it takes consistent revenue growth to deliver outstanding shareholder returns.
Why? Although effective cost cutting has contributed to Gillette’s profits, the company’s annual rate of sales growth shrank from a 10-year average of 6 percent (from 1993 through 2003) to 1 percent over the three years from 2000 to 2003.
It seemed like good times were rolling.īut the stock market responded by shaving Gillette’s stock price by more than 5 percent. Gillette told investors in late July that sales of razor blades, oral care products, and batteries were up, too. Weeks after its May 2004 introduction, the M3 Power was the top-selling razor in the United States, and helped Gillette, one of the consumer products industry’s consistently great innovators, to a whopping 26 percent rise in second-quarter profits. Battery-powered yet bladed, the product blew away the competition just as effectively. The Gillette Company came to market in 2004 with a new razor, the M3 Power, that actually blows whiskers away from the skin for a closer shave.
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