Preview: Consumer goods makers weighed down by weak US and European sales

WK Kellogg Co

19/07/2024 06:00

By Richa Naidu
       LONDON, July 19 (Reuters) - Consumer goods giants
including Nestle, Kraft Heinz and Reckitt are likely to report
weak second-quarter sales growth from Europe and the United
States, as consumers opt for brands that have been better at
slowing price hikes, Nielsen data shows.
    Analysts and investors have voiced concerns for several
quarters about food, beauty and household products makers not
being able to win back shoppers they alienated when they hiked
prices for over two years in the wake of the pandemic. 
    The inflation sparked a global cost-of-living crisis, with
increases in North America spreading to Europe and the rest of
the world.
    The ability to cut prices - or keep them in check - across
the consumer and food sector is determining which companies
report better sales, increase market share and protect margins.
    Sales volume and margin growth will be the key performance
indicators this quarter, with product innovation also a
priority, Barclays analyst Warren Ackerman said. Less affluent
U.S. consumers remained under pressure, he added.
    "Unilever and Danone look to have volume momentum but
questions remain at Nestle," Ackerman said.
    Nestle  NESN.S  in April missed first-quarter organic sales
growth estimates, as the world's biggest packaged food company
continued to hike prices and therefore sold fewer products,
particularly in North America.
    Sales in stores in Europe at companies including Reckitt
 RKT.L , Kellogg  KLG.N  and P&G  PG.N  are estimated to have
declined in dollar terms in each of the past three months,
according to Nielsen data analysed by Barclays. 
    Similarly, Reckitt, Nestle and Henkel  HNKG.DE  are expected
to report lower U.S. store sales for the quarter and smaller
market share in several categories, the data shows.
    
    PRIVATE LABEL COMPETITION
    PepsiCo  PEP.O  missed expectations for second-quarter
revenue last week as a series of price hikes and competition
from private label brands slowed sales of its snacks and soda
mainly in the United States, its largest market.
    "As some competitors, particularly private label, have grown
their market share, in a lower price environment it will be
interesting to see if branded consumer products can improve
their market share," said Tineke Frikkee, a portfolio manager at
Waverton Investment Management, which invests in Unilever and
Reckitt.
    "Unilever particularly has stated it wishes to regain some
lost market share. This can be through lower pricing, but often
is more indirect through promotions, like 2-for-the-price-of-1
etcetera," she added. 
    The Nielsen data estimates Danone  DANO.PA , Kellogg and
Unilever store sales mostly rose in Europe and the United States
during the quarter to the end of June, with Unilever helped by
growth in household and personal goods even as its food brands -
which include Knorr soup and Ben & Jerry's ice cream - lost
ground to cheaper rivals.
    Unilever is in the midst of a drive to improve productivity
to try to revive growth after several quarters of
underperformance. It told senior executives last week that as
many as 3,200 roles would be cut in Europe by the end of 2025.
    Barclay's Ackerman said it was a "complicated picture" in
the rest of the world.
    "In general consumers are feeling stressed and being more
choiceful about spending," Ackerman added. "They are hunkering
down and reducing food waste. Trips to restaurants are down
which in theory should help in-home food consumption."
    ($1 = 0.7701 pounds)

 (Reporting by Richa Naidu; Editing by Mark Potter)
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