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What Top CEO’s See for 2010

A common man will have plenty of sources that will facilitate industry forecasts. However, the original source are the people who spend most of their quality time in the trenches- The CEOs. Their judgments might not be completely authentic, for forecasting is often prone to errors. Nevertheless, it is still wise to heed the CEOs because their forecasting is a result of good experience and thorough analysis.

  1. Location still matters
  2. Nowhere did the difference between domestic and international economies find sharper contrast than in the expectations of Big Tobacco names Philip Morris International and its former parent, Altria.

    Altria, which hawks its cigarette, cigar, and smokeless-tobacco brands in the U.S., opened up by noting high unemployment and low consumer confidence. "Nearly 75% of adult consumers have a different set of priorities than several years ago," management observed, further citing that "nearly 60% of adult consumers" don't plan to spend as they once did. Those figures certainly don't surprise.

    Conversely, global player Philip Morris International revealed a bullish outlook, going so far as to assert that "the stock market does not yet fully value the underlying strength of our business and its excellent momentum."

    And the divergent forecasts show up in each company's numbers. Altria took the opportunity to revise its midterm EPS guidance, down from 8%-10% growth to 7%-9%. Philip Morris, on the other hand, held fast to its 2010 EPS growth estimate in the high teens, not to mention its long-term guidance of 10%-12% annual currency-neutral gains.

    Finally, while Philip Morris's most recent dividend boost came in at 7.4%, Altria managed only a 2.9% increase.

    With the exception of certain European markets - Spain and Russia, for instance the international consumer will continue to show relative strength. So whether we're talking menthol cigarettes or running shoes, companies that boast a strong global footprint should outperform - provided the dollar doesn't surge.

  3. Values are here to stay
  4. Companies continue to describe a choosy, better-informed, value-focused consumer. Packaged-foods producer ConAgra perhaps said it best: "We may be in an economic statistical recovery, but don't tell consumers that just yet. We believe value is here to stay even beyond the eventual recovery on Main Street."

    Snacks-and-cereal maker Kellogg roughly seconded that notion, citing what it called "an absolutely critical data point" -- coupons. Having declined for 17 consecutive years, U.S. coupon usage jumped by 20% in 2009. If, embedded in that trend, is a widespread consumer insistence on promotional pricing, then companies could eventually find themselves forced to choose between volume growth and margin preservation.

    Meanwhile, both Unilever and PepsiCo reminded analysts that value is not purely about price, but rather the relationship between price and product quality. In other words, there's a lot that companies can do in terms of consumer messaging and product innovation. Even in the age of thrift, consumers are unlikely to forget that you often get what you pay for.

  5. Health is Wealth
  6. Campbell Soup talked up its health innovations, including a major renovation to its U.S. soup and broth portfolio. Lower sodium, added vegetables, and a low cholesterol profile are among the key features. Also, management highlighted its V8 line, where V8 Fusion sales have been on a tear.

    Even deli-product and sweets specialist Sara Lee has joined the club, reducing salt content and, well, throwing its weight behind national anti-obesity initiatives. Consumers will increasingly demand such products. In part, the shift is likely about health for health's sake, but that it also has to do with consumers finding small ways to feel good about themselves amid tough economic times.


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