Clay CrumblissClay Crumbliss

There’s no shortage of challenges for consumer packaged goods companies in 2022, perhaps more today than at any time in decades. With challenges comes uncertainty, and with uncertainty comes the question of how to communicate effectively and honestly with stakeholders.

Nearly full two years after our lives were abruptly disrupted by the onset of the pandemic, COVID-19 continues to dictate much of how we work, shop, learn and live our daily lives.

It’s well known that most packaged food producers benefited enormously from housebound consumers eating more at home over the past couple of years. The greatest beneficiaries were those whose portfolios skew to meal categories which replaced many away-from-home consumption occasions as employees adopted remote working arrangements and children attended school virtually from their living rooms.

For beverage companies, the story was more mixed with certain categories accelerating in at-home retail channels, such as water, juice and sodas, while other categories suffered from the significant reduction in traffic at bars, restaurants and other venues that were closed or operated at reduced capacities. The most pronounced declines were alcoholic beverages where sales in the on-premise channel still haven’t recovered to pre-pandemic levels.

This article is featured in O'Dwyer's Mar. '22 Food & Beverage PR Magazine
(view PDF version)

Recently, it appears that consumption habits are normalizing based on retail scanner data. However, the emergence of new variants of the virus—and how consumers, employers, governments and educators choose to respond—will likely continue to prove disruptive to food and beverage consumption patterns, at least in the short term.

While sales volatility from COVID-19 is arguably less of a factor today than it was this time last year, what remains a significant challenge for managers is the nearly unprecedented levels of input cost inflation. To whatever economists and market commentators might attribute the spike, these higher costs run the gamut of the food and beverage supply chain including ingredients, shipping, labor, packaging and logistics that are putting significant pressure on corporate margin structures.

This is evidenced by recent examples such as Kellogg, which said it expects “double-digit” input cost inflation in 2022, while competitor General Mills is targeting a seven to eight percent increase for the year and Conagra told investors to expect a 14 percent jump. To put this into context, in the years preceding the pandemic, the annual cost of goods inflation for packaged food companies was in the two- and three-percent range, on average, based on a sampling of management comments.

For the consumer, the obvious result will be higher prices at the register. The Consumer Price Index, which measures prices across a basket of consumer goods, rose 7.5 percent over the last twelve months ending in January with at-home food prices up 7.4 percent, according to the U.S. Bureau of Labor Statistics. In general, as consumer prices aren’t rising as quickly as the costs borne by manufacturers, margin pressures will likely persist throughout most of 2022.

All this volatility on both the top and bottom lines leaves management teams with the agonizing internal debate of how to set external expectations that balance their own optimism and pragmatism with hope and disappointment for their stakeholders.

In the early days of the pandemic, many companies elected to withdraw their guidance metrics given the total lack of visibility in the marketplace. Investors were generally understanding of the immense challenges associated with accurate forecasting and therefore gave management teams a pass, at least for a while.

As the quarters have since rolled by, that approach is now less acceptable even as the operating environment remains equally uncertain. It’s clear how the demand for transparency from market participants can easily be in conflict with management’s lack of future visibility, and it begs the question of how firms should be communicating in an exceptionally volatile 2022.

When it comes to the necessary, often burdensome—as many finance chiefs might candidly admit—task of providing annual guidance, marketplace complexity isn’t an excuse for missing numbers. According to data from Nasdaq, investors are proving less tolerant of earnings misses this cycle with relatively more pronounced stock price compression, on average, than observed in previous years.

The market will judge executives on how well—or how poorly—they communicate almost as much as it will judge the operations and financial results they put forth. As we like to tell our clients, “the numbers don’t speak for themselves.” Of course, performance and results matter, and successful companies will ultimately be rewarded with higher valuations; but, the perception and understanding of those results can be a significant driver of a firm’s market valuation and, importantly, its reputation. Therefore, when the stakes are this high, communications with your audience should be clear, consistent and realistic.

Be clear. If the message confuses your audience, it’s highly unlikely it will achieve the intended outcome. When it comes to financial guidance, be as specific as possible. We advise clients not to leave key metrics open to interpretation. A thoughtful, deliberate approach to setting expectations will ensure a more accurate delivery of the message you are trying to send.

Be consistent. Investors demand consistency because it mitigates negative surprises. Stay on message in every interaction, whether with investors, analysts, the press and even your employees. While the level of detail you give certain constituencies may vary based on the audience (i.e., your board will be entitled to different information than your investors), communicate the same basic expectations to all your stakeholders with a consistent, almost predictable message.

Be realistic. This is often the most challenging point for managers—and sometimes even more difficult for founders. There’s a fine line between “selling your story” and overstating the positives in the face of obvious adversity. Nothing will put stock in the penalty box faster than executives who gloss over reality. Your audience will appreciate the candor and may even reward you for it as investors seek transparency and stability. As it relates to giving guidance, the “beat-and-raise” approach is a time-tested, proven strategy to generate positive news that moves stock prices higher and creates trust between the investment community and management teams.

The truth is your audience values trust more than it values undue optimism. Today’s dynamic marketplace means the tides can shift quickly in ways that may or may not be within the company’s control: supply chain constraints, product out-of-stocks, or labor shortages, to name a few. The market’s reaction and your company’s reputation can depend on how proactively you acknowledge the shift, provide transparency and reset expectations given the new realities.

Managing the message and controlling the narrative is a daily task for communications professionals. Whether it relates to corporate strategy, financial guidance, brand management or any other aspect of a CPG company’s identity, we recommend a deliberate and precise approach to matters of public relations and investor relations. While information is more widely available today than at any other time in human history, the markets in which companies operate are increasingly complex and interconnected. Your communications approach should be, too.


Clay Crumbliss is a Managing Director at ICR, Inc.