Some of the world’s largest consumer goods producers will face falling sales in the coming months as shoppers turn to cheaper supermarket own brands in a bid to ease pressure on the cost of living caused by soaring inflation.
Multinational food and household makers, including Unilever and Danone, are preparing to release their first-half results in the coming days. Analysts predict they will see lower sales volumes in the coming months as sales of so-called private label products have started to pick up.
Private label has gained market share across Europe in the past four weeks, in contrast to “modest and consistent share declines” before this year, Jefferies analysts said.
Households are ditching branded yogurts, coffee, ice cream and paper goods in favor of stores’ own versions, while also switching to cheaper versions of savory snacks and frozen meats and vegetables, according to Jefferies. Private labels have gained 1.1 percentage points of market share in Europe over the past four weeks, according to the group, compared to 0.38 percentage points last year.
In the United States, private label products have gained market share in the four consecutive months to mid-June, according to Stifel analysts. They said the rise followed two years of “persistent market share losses” for supermarket own brands.
“The growth of private label brands has been a persistent threat to major food companies and will likely be an age-old theme over the next five to 10 years,” said Stifel analyst Christopher Growe.
Berenberg said sales volumes at major consumer goods companies held up well in the first quarter of the year and expected relatively similar positive numbers for the second quarter, but warned of a drop in sales in the second half. .
Their forecasts include falls of more than 3% for Unilever, which makes Magnum ice cream and Dove soap; the French dairy group Danone; JDE Peet’s coffee group; The German group Henkel and the American snack manufacturer Mondelez, owner of Cadbury.
The world’s biggest food maker Nestle and cosmetics group L’Oreal were less at risk, Berenberg analysts said.
Unilever “is exposed to many of the most private label and/or downside categories, including skin cleansers, household cleaners, kitchen ingredients, deodorants, laundry detergents and ice creams” , said James Targett, an analyst at Berenberg.
Jefferies analysts noted Danone’s vulnerability to price declines in its yogurt portfolio. A Berenberg survey of UK consumers found that half of respondents expected to ditch their usual brands, while 58% planned to switch to private label.
Owners of global brands have hiked prices in the face of soaring raw material, labor and transportation costs. In the first quarter, multinational consumer companies reported raising prices by an average of 5% 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 have been able to pass on further cost increases to households without facing a drop in Sales.
While commodity prices have retreated somewhat from this year’s highs, consumer goods groups still have significant cost overruns to pass on to customers who are also facing the possibility of a recession.
PepsiCo pushed prices up 12% year-over-year in the three months to mid-June, while achieving volume growth of 1%.
“Europe has the highest private label penetration, so it will clearly be the most vulnerable market for private label outsourcing,” Targett said, adding that U.S. consumers have more options for cheaper branded products as well as supermarket own brands.
Private label is gaining ground in the United States in categories such as bleach, vitamins and bottled water, Jefferies said.
In emerging markets, consumers in a hurry tend to switch from packaged foods to home cooking, Targett said, or to regional players less shaken by currency fluctuations and supply chain issues, like Indonesian group Wings. , a rival of Unilever in the country.
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