Consumer giants winning despite price hikes
STORY: Nestle, which makes Nescafe coffee and Cheerios, posted its strongest nine-month sales growth in 14 years and raised its full-year guidance, as it successfully passes higher costs on to shoppers.
Similarly, Tide detergent maker P&G beat estimates for quarterly sales and profit, helped by price hikes on everything from Head & Shoulders shampoo to Gillette razors, even as a stronger dollar weighed on its revenue from overseas.
Jessica DiNapoli is a U.S. Consumer Products Correspondent for Reuters:
“People are spending their money on everyday items, some people are trading down into mid-tier products. The thing is they are still spending despite the continued price increases that have come from major food and consumer goods companies like Nestle and Proctor and Gamble.”
Consumer companies - many of which thrived during COVID-19 lockdowns as people stockpiled their products - are once again emerging as winners in a time of global crisis, maintaining double-digit margins as people are forced to pay more for everyday products.
“The pandemic seems to be over, but a lot of people are still working from home and they're spending less outside of the home, which is helping companies like Procter and Gamble and Nestlé. Procter and Gamble makes toilet paper. So if you're at home more, you're using more toilet paper. And Nestlé makes products like Coffee-Mate and Nespresso. So if you want to have a coffee treat at home, you're buying products like that instead of going out to buy an $8 latte.”
Despite the strong sales, some analysts worried price rises could soon push consumers too far, potentially pricing some products out of their reach.
But DiNapoli says companies - like P&G - insist they’re ready if things go south.
"If we have a full blown recession, a company like Procter and Gamble says that they're ready for consumer habits that change because they have a good, better, best product category. So people can trade down into cheaper products. The other thing is, is in a recession, there is lower costs of gas, lower costs of freight. And that would help these companies so that they are in a good position still.”
