Consumer groups face sales hit as cash-strapped shoppers drop
Some of the world’s largest producers of consumer goods are facing a blow to sales in the coming months as shoppers turn to cheaper supermarket brands in a bid to relieve cost-of-living pressures caused by high inflation.
Multinational food and household product makers, including Unilever and Danone, are preparing to publish first-half results in the coming days. Analysts expect that they will record a decrease in sales in the coming months, as sales of so-called private-brand goods begin to grow.
Analysts at Jefferies said private brands have gained in market share across Europe over the past four weeks, reversing “modest declines in stocks” before this year.
Families are giving up brand-name yogurt, coffee, ice cream and paper products in favor of store-bought versions, while also giving up cheaper versions of salty snacks, frozen meats and vegetables, according to Jefferies. Private brands have gained 1.1 percentage points of market share in Europe in the past four weeks, according to the group, compared with 0.38 percentage points a year ago.
In the United States, private label products gained market share in the four consecutive months through mid-June, according to analysts at Stifel. They said the rise came after two years of “continuous losses in market share” for private supermarket brands.
“The growth of private labels has been an ongoing threat to large food companies, and is likely to be a secular topic for the next five to 10 years,” said Christopher Groh, analyst at Stifel.
Berenberg said sales volumes at large consumer goods companies were resilient in the first quarter and expected relatively similar positive numbers for the second quarter, but he cautioned against lower sales in the second half.
Their forecast includes a drop of more than 3 percent for Unilever, which makes Magnum ice cream and Dove soap. French dairy group Danone. JDE Peet’s coffee range; German Henkel Group and American snack maker Mondelez, owner of the Cadbury Corporation.
The world’s largest food maker, Nestlé and cosmetics group L’Oréal, was less at risk, Berenberg analysts said.
James Targett, an analyst at Berenberg, said Unilever “exposes many of the most vulnerable categories of private label and/or low-trade labels, including skin cleansers, household cleaners, cooking ingredients, deodorants, laundry detergents, and ice cream.”
Jefferies analysts noted Danone’s weakness in the face of lower trading in its yogurt portfolio. Berenberg’s survey of UK consumers found that half of respondents expected to switch from their usual brands, while 58 per cent were considering switching to private brands.
Global brand owners are increasing their prices in the face of sharp increases in the cost of goods, labor, and transportation. In the first quarter, multinational consumer companies said they raised prices 5 percent year on year.
Upcoming results — including Unilever and Mondelez on July 26, Danone and Reckitt Benckiser on July 27, Nestlé on July 28, and Procter & Gamble on July 29 — will show whether they are able to pass on further cost increases to households without confronting Reduction in costs. sales.
While commodity prices have regressed somewhat from this year’s highs, consumer goods groups still incur significant additional costs to pass them on to customers who are also facing the prospect of a recession.
PepsiCo raised prices 12 percent year-over-year in the three months to mid-June, while still achieving 1 percent volume growth.
“Europe has the highest penetration of private labels, so it will obviously be the most vulnerable market for low-traffic private labels,” Target said, adding that U.S. consumers have more options for cheaper branded goods alongside supermarket brands.
Jeffries said the private label is gaining ground in the United States in categories such as bleaches, vitamins, and bottled water.
Target said that in emerging markets, stressed consumers tend to switch from packaged foods to home cooking, or to regional players less affected by foreign currency fluctuations and supply chain problems, such as Indonesia’s Wings Group, which rivals Unilever in the country.