Cost crisis will fuel risky consumer growth dash

Heineken NV

10/09/2026 09:58

The author is a Reuters Breakingviews columnist. The opinions expressed are her own.
By Aimee Donnellan
DUBLIN, Sept 10 (Reuters Breakingviews) - Consumer goods group CEOs are surprisingly bullish about the future. The likes of Heineken HEIN.AS, Nestlé NESN.S and Unilever ULVR.L have set ambitious growth targets for the coming years, betting that new leadership, corporate restructurings, and cooling inflation will help them sell more products. But rising oil and commodity prices threaten to push costs back up, while squeezing consumer demand in core markets like the United States. That means they may have to chase growth in far flung geographies, which carries its own risks.
Right now, Heineken reckons it can grow revenue annually at a mid-single-digit rate through 2030, while Nestlé is targeting growth of 4% over that period, and Unilever hopes to boost sales by between 4% and 6% a year. There are several reasons for this optimism. Unilever’s new boss Fernando Fernández has sold the lacklustre food business to U.S. rival McCormick MKC.N allowing him to focus on faster-growing health and beauty products. Nestlé has offloaded its vitamin and half its water businesses, leaving it more geared towards pet food, coffee and nutrition. Meanwhile, Heineken has stripped out hundreds of millions of euros of costs and is hoping to sell more premium beer to 17 faster-growing markets.
Still, the road ahead looks far from smooth. Take energy costs. Since the U.S. war with Iran began in late February Brent crude has soared to over $101 a barrel, a 40% increase on February’s levels, which pushes up the cost of running factories and shipping goods. Grain tells a similar story. Wheat harvests have been battered by heat and drought. The U.S. is expected to have one of its worst harvests in half a century. That’s a problem for Nestlé which makes noodles, cereals and KitKats from wheat. Meanwhile, sugar prices have soared nearly 22% in August.
The upshot is that consumers will have to spend more filling up their cars and bellies, and heating their homes, making them likely to cut back on non-essential goods. While in the 2022 energy crisis companies were able to offset stagnant or falling volumes with higher prices, this time consumers are grappling with high interest rates and hence have less scope to splash out on branded goods and premium alcohol.
Analysts expect consumer goods groups will struggle to meet their targets. According to consensus forecasts, Heineken will fail to meet its mid-single-digit growth goal over the next three years, while Nestlé will only see annual growth of less than 4% and Unilever just over 4%, as per Visible Alpha. These issues are reflected in sector valuations which have all come down since the outbreak of the conflict in the Middle East.
To stay on target, consumer goods groups may have to go hunting for growth. That means seeking more scale in more vibrant emerging markets, such as Vietnam where the economy is expected to grow 7.5% this year, according to the International Monetary Fund. These groups could also try to sell more in India or Ethiopia, which are expected to grow by over 6% and over 9% respectively, according to the IMF. On Wednesday, Nestlé announced plans to spend $170 million expanding its pet food production processes in Thailand. 
But these markets all carry their own risks. India is already very competitive and its home-grown brands are increasingly competing with global titans. Vietnam is not large enough to make up the shortfall in the U.S. and Europe and war-torn Ethiopia has an uneven economic record.  There’s also a danger that these companies all try to muscle in on the same geographies which will push prices down. This risky backup plan means consumer goods company valuations are likely to stay depressed. 
     
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CONTEXT NEWS
World ​food prices rose in August to their highest since late 2022, as adverse weather and ‌war disruption in the Black Sea heightened concern over supply of staples, the United Nations' Food and Agriculture Organization said on September 4.
Brent crude prices rose to $101 a barrel on September 10, a 40% increase from the day before the U.S. launched an attack on Iran.

(Editing by Neil Unmack; Production by Streisand Neto)
((For previous columns by the author, Reuters customers can click on DONNELLAN/Aimee.Donnellan@thomsonreuters.com))