Strong investment behind down-market success
For much of the country winter is setting in, and that means re-adapting to winter driving. There's a metaphor here because winter driving can be nasty, just like the current global marketplace. And when you inevitably slide into that ice patch you have two choices: Hit the brakes, or step on it. Hit the brakes and you skid, you lose control. Hit the gas and you gain traction, dig in and get out of the jam.
Right now there's a lot of ice on the road in the global marketplace. High unemployment, economic uncertainty, volatile energy and commodity prices, intense global competition–it's a blizzard of challenges. But many retailers and CPGs are hitting the gas and getting through the storm with remarkable results.
I recently dined with Ric Jurgens, Hy-Vee chairman and CEO, during Progressive Grocer's Top Women in Grocery awards banquet. Knowing business is good for Ric, I asked him how he managed to do it while the economy was heading south. His unhesitating response: "We stuck to our plan. We didn't cut back on our capital expenditures, and we didn't cut back on our investment in employee education and development." And while the economy is still in the tank, Hy-Vee is investing and growing.
On the CPG side, we interviewed John Compton, chief executive officer of PepsiCo Americas Foods & Global Snacks Group, for our cover story in this issue. Same question, same answer–hit the gas. Overall PepsiCo's profit surged 4.1 percent in its just finished third quarter, despite enormous pressure on its soft drink business and unprecedented price increases.
Not every company can simply spend its way through a recession, but those with vision and a solid plan usually succeed, while those that hit the investment brakes often find themselves less able to respond when economic conditions rebound. A recent survey by business analysts at PricewaterhouseCoopers, reported in The Wall Street Journal, indicates that more than half of major corporations surveyed plan higher levels of capital spending in 2012, despite universally high pessimism about the overall economy. In fact, overall capital spending hit a record $68.9 billion in August 2011, the last month for which figures were available, according to the Commerce Department.
Companies seem to realize that now is the time to hit the gas. But don't forget to prepare for the ice patches so that you can control your skid and come out in line–with your goals.