Consumer goods companies are going for mixed sales as prices fall in the US
According to Nielsen, retail sales fell 4.2% but rose 8.1% in the four weeks ended December 3 in Europe. The data showed that Nestle’s U.S. store sales fell 2.5% in the period, while European sales rose 5.2%.
Consumer goods companies are likely to post stronger fourth-quarter sales growth in Europe than in the United States, monthly data showed, boosted by persistently higher prices in countries such as Britain, France and Germany, even as Americans paid less.
Companies like Procter & Gamble and Nestle began raising prices in the United States in late 2021, initially driven by a pandemic-induced freight and input cost crisis.
The increases, which were stepped up after Russia’s invasion of Ukraine, were easier to achieve in the United States than in Europe because contracts with companies like Walmart and Target are a lot more flexible than highly regulated deals in Europe.
Because the increases in the United States happened early, the worst is behind us, analysts say, while European prices will take longer to fall.
“Sales growth in Europe is higher… but that is only a matter of time. In six months, prices in Europe will normalize, just like in the United States, and will experience similarly low growth,” said Bernstein analyst Bruno. said Monteyne.
P&G, the world’s largest personal goods company, will begin reporting the industry’s fourth-quarter results on Tuesday.
Price increases likely drove strong retail sales growth in Europe at companies including Nestle, Danone, Kraft Heinz and Reckitt, monthly estimates from information and market measurement group Nielsen show, even though growth was weaker in the United States.
For example, in the four weeks ending December 2, Reckitt’s US
According to Nielsen, retail sales fell 4.2% but rose 8.1% in the four weeks ended December 3 in Europe. The data showed that Nestle’s U.S. store sales fell 2.5% in the period, while European sales rose 5.2%. Nielsen data does not cover every possible sales channel.
Pepsico, which is in tight price negotiations with French supermarket chain Carrefour, is estimated to have generated just 1.1% growth in US retail sales in the four weeks to December 2.
Meanwhile, P&G is estimated to have achieved sales growth of 3.4% in the US in the period, compared to 6.1% in Europe in the four weeks to December 3.
COMPETITIVE PRICES
The price easing came as U.S. consumer confidence rose during the quarter after months of decline, with Americans becoming more optimistic about current and future business conditions and the labor market. The consumer confidence index rose to a five-month high in December.
However, in Europe, economic sentiment rose only slightly in the final quarter of the year, in line with expectations, as a modest rebound in sentiment in services, retail and among consumers offset the decline in business confidence.
Analysts and investors have warned for months that continuing to raise prices in Europe could alienate cash-strapped consumers who have turned to retailers’ own brands.
“Some companies will have lost market share and may want to price more competitively to regain some market share,” said Tineke Frikkee, portfolio manager at Waverton Investment Management, which invests in Unilever and Reckitt. “Pricing decisions will vary by product, by country, by company.” Nestle, Danone and Kraft Heinz and Reckitt declined to comment. Pepsico and P&G did not respond to requests for comment.
First print: January 23, 2024 | 00:00 IST