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Consumer Products Poised for a Rebound in 2010

Posted: November 19, 2009

Report abridged from Kline & Company's November newsletter.

There is no doubt, says Kline & Company's Carrie Mellage, that 2009 will likely go on record as one of the toughest years in the world’s economic history, leveling a serious blow to the consumer products industry. Struggling with declining sales and profits, many retailers have shuttered doors or closed down completely. However, new U.S. GDP figures already show a promising 3.5% growth rate for the third quarter, and there are signs of a slow (and hopefully steady) recovery. As the industry looks ahead to 2010, Kline & Company examines the burning question: What can consumer product companies do to get a jump on the recovery and get ahead in the coming year? In nearly every sector, 2009 was unquestionably a rough year for the consumer markets.

The news for marketers hasn’t been all bad, so long as one knows where to look. The naturals segment remains a relatively high-growth proposition from both a product and packaging standpoint in personal care and in home care. Sales of natural personal care products in the United States have grown by about 8% in 2009, down from 15.3% in 2008, but remains well ahead of the overall market.

In the BRIC countries (Brazil, Russia, India, and China), the growth in naturals has been spectacular, with each market adopting its own unique perspective on this trend. In Brazil, the naturals movement is about biodiversity and the rain forest connection; in Russia, the emphasis is on Siberian earth minerals; India’s surge is based on traditional ayurvedic principles; and China’s long heritage of herbal medicine serves as a foundation in this high-growth market.

Value brands and value channels have weathered the storm quite well, albeit at the expense of luxury brands and retailers, as consumers look to cut costs at every opportunity. Perhaps the biggest indicator of this trend has been the incredible surge in sales of private-label products. In many product categories, private-label products registered double-digit gains (as much as 30% in liquid soaps), while the product categories as a whole barely treaded water or even lost steam.