NEW YORK, Aug. 28, 2008 (GLOBE NEWSWIRE) -- The uncertainty in the economy has taken its toll on consumer products companies, which sharply lowered their own companies' revenue growth targets for the upcoming 12 months to 3.2 percent in the second quarter from 5.7 percent in the prior quarter, according to PricewaterhouseCoopers' Consumer Products Barometer. Despite the drop in growth targets, senior executives do not anticipate a drop in revenue contributions from international sales. The projected contribution from international sales for the next 12 months rose 1 point from the prior quarter to 26 percent, which represents a jump of 7 points from a year ago, as the U.S. economy weakened. In the second quarter, 61 percent of consumer products companies increased sales abroad and only 6 percent reported a decline.

Uncertain Domestic and International Economic Outlook

Optimism about the 12-month outlook for the U.S. economy remained low among senior executives of consumer products companies. Only 17 percent of respondents are optimistic about the U.S. economy versus 19 percent in the first quarter of 2008 and a steep decline from the 53 percent that were optimistic in the second quarter of 2007. Uncertainty about the world economy also increased for respondents selling abroad, with only 17 percent expressing optimism, down from 33 percent during the first quarter.

``It's no surprise that consumer products companies are focusing their efforts on international markets to boost sales, given the weak economy in the United States,'' said John Maxwell, leader of the retail and consumer industry practice at PricewaterhouseCoopers. ``And, despite international markets continuing to show positive growth for consumer products companies, we are beginning to see optimism wane as the impact of the U.S. economy begins to influence international markets.''

Oil/Energy Prices Lead Barriers to Growth

Nearly all consumer products companies are now feeling the impact of higher oil/energy prices, with 93 percent citing it as their major barrier to growth over the next 12 months, up from 79 percent in the first quarter of 2008. Concerns about oil/energy prices as a barrier to growth remain much higher among consumer products companies than among the all-industry consensus, where 71 percent were concerned. Consumer products executives also cited lack of demand, the monetary exchange rate (the falling U.S. dollar), and increasing concern about profitability as major barriers to growth during the next 12 months, which is consistent with what they have reported in the prior two quarters.

Rising Costs and Prices

Overall, both costs and prices rose sharply in the second quarter. Costs increased for 85 percent of consumer products companies and decreased for only 3 percent -- a net of 82 percent with higher costs, which is 18 points higher than the prior quarter. A net 63 percent of companies increased prices this quarter (70 percent raising prices and 7 percent lowering prices), jumping 14 points from the first quarter. These are the largest quarter-to-quarter increases in both costs and prices since the Consumer Products Barometer began three years ago.

``With the rise in commodity prices and the challenges raised with a weak economy, consumer products companies are having to develop new strategies to remain successful,'' noted Lisa Feigen Dugal, North American retail and consumer industry advisory leader for PricewaterhouseCoopers. ``This could include rebalancing their product portfolios, resizing packaging, reformulating products and managing transportation costs as they try to reign in expenditures and curtail the necessity for price increases.''

Fewer Companies Investing More Capital

Fewer consumer products businesses are planning major new investments of capital during the next 12 months, with only 37 percent reporting as such in the second quarter. This represents a drop of 8 points from 45 percent last quarter and notable decline of 14 points from the 51 percent reported in the second quarter of 2007. Conversely, while fewer companies are planning to make investments, those that are expect to spend more. The mean investment rose to 9.7 percent of total sales, the highest level reported in more than a year and much higher than the all-industry consensus of 8.1 percent reported in the second quarter of 2008.

Expanding into New Markets

More than two-thirds of consumer products companies plan to undertake a new business initiative in the upcoming 12 months (68 percent), up 16 points from the first quarter of 2008. Expansion into new markets abroad garnered the most interest, with 37 percent planning to undertake this initiative within the next 12 months. Plans for M&A activity rose to 32 percent from 28 percent in the prior quarter with the majority of those companies planning to purchase another business and only a small number planning an equity carve-out or spin-off.

Special Issues Affecting Consumer Products Companies: Rising Input Costs

Each quarter, the Barometer spotlights an issue that is currently affecting U.S. consumer products companies. When asked about the current cycle of rising input costs, more than half (58 percent) of senior executives of large consumer products businesses expect it to last about 12 to 24 months. Only 12 percent expect it to last less than a year, and 25 percent expect it to last longer than two years.

In order to address this cycle of rising costs, the vast majority of consumer products companies are employing innovative strategies to achieve operational efficiencies (90 percent) and almost as many are employing a more integrated approach to cost management across the entire supply chain and with key functional areas such as sales, marketing, and human resources (80 percent). Close to half (49 percent) are utilizing financial instruments (hedges, derivatives, currency swaps, etc.) to a greater degree.

Additionally, when faced with these rising input costs, most consumer products companies are working more closely with suppliers and identifying alternate raw material sources or suppliers (86 percent each). Many are also developing more energy efficient operations (69 percent) and/or utilizing new manufacturing techniques (64 percent).

About the Consumer Products Barometer

PricewaterhouseCoopers' ``Consumer Products Barometer'' is a quarterly survey of top executives in 59 large, consumer products businesses (surveys conducted between May 12, 2008 and August 12, 2008) compared with the 129 large, multinational company consensus.

Profile of Consumer Product Barometer Demographics:

      * Average # Employees                       6,365
      * Average Revenues                          $3.35 B
      * Average Enterprise Revenues              $10.09 B
      * Market Capitalization                    $11.46 B

For more information about Barometer surveys, including recent economic trend data and topical issues, please visit our web site: http://www.barometersurveys.com

About PricewaterhouseCoopers

PricewaterhouseCoopers (http://www.pwc.com) provides industry-focused assurance, tax and advisory services to build public trust and enhance value for its clients and their stakeholders. More than 146,000 people in 150 countries across our network share their thinking, experience and solutions to develop fresh perspectives and practical advice.

``PricewaterhouseCoopers'' refers to PricewaterhouseCoopers LLP or, as the context requires, the PricewaterhouseCoopers global network or other member firms of the network, each of which is a separate and independent legal entity.

          PricewaterhouseCoopers
          Clare Chachere
          (512) 867-8737
          clare.chachere@us.pwc.com