By Richa Naidu and Dominique Vidalon LONDON/PARIS (Reuters) -Consumer goods groups Unilever and Danone beat third-quarter sales estimates on Thursday as they slowed price hikes and invested in innovations to win back shoppers who had turned to cheaper brands during a surge in inflation. The cost of everything from freight to raw materials rose during […]
By Richa Naidu and Dominique Vidalon
LONDON/PARIS (Reuters) -Consumer goods groups Unilever and Danone beat third-quarter sales estimates on Thursday as they slowed price hikes and invested in innovations to win back shoppers who had turned to cheaper brands during a surge in inflation.
The cost of everything from freight to raw materials rose during the pandemic, while grain and energy became more expensive after Russia’s full-scale invasion of Ukraine in 2022. The packaged food industry , including Unilever and Danone, raised prices to protect margins.
Shoppers started trading down to cheaper alternatives, such as private label brands owned by Walmart, Tesco and Carrefour.
At their peak in the fourth quarter of 2022, Unilever’s underlying prices rose 13.3%, with prices at its home care business up nearly 17% and those at its ice cream business about 14% higher.
In stark contrast, Unilever on Thursday reported underlying third-quarter price growth of 0.9%, with underlying volumes up 3.5%, the biggest increase since the first quarter of 2021. Analysts had expected a 1% increase in prices and a 3.2% rise in volumes.
We have delivered a fourth consecutive quarter of positive, improved volume growth, with each of our business groups driving higher volumes year-on-year,” CEO Hein Schumacher said in a statement, adding that Dove soap, Comfort fabric conditioner and Magnum ice creams had performed well.
Meanwhile, France’s Danone also beat third-quarter sales expectations, boosted by a 3.6% rise in sales volumes as price hikes slowed to 0.7%, reflecting strong demand in North America for high-protein products, coffee creamers and waters.
Both Unilever and Danone kept their forecasts for 2024.
‘REASSURING’
Unilever reported a 4.5% rise in third-quarter underlying sales , beating analysts’ average forecast of a 4.2% increase.
It is reassuring to see strong volume growth in most categories,” Waverton Investment Management portfolio manager Tineke Frikkee said. “A good result in ice cream is helpful as they are preparing to exit this division.”
Unilever is one year into a turnaround under CEO Schumacher. As part of the plan, it is looking to spin out its ice cream business, which makes Ben & Jerry’s and Cornetto. The company is also pushing out new products, like Wonder Wash quick cycle detergent, that it will continue to price higher to drive sales.
Danone, the maker of Activia yoghurt, Evian water and Aptamil infant milk, posted a 4.2% rise in third-quarter like-for-like sales, above analysts’ expectations for a 3.9% rise in a company-compiled consensus.
Volumes have been a particular focus for the market through the third quarter, and this bodes well for Danone today,” Bernstein analysts said in a note. Shares in Danone rose 2% in early trading .
We see some inflation in our material costs moving forward,” finance chief Juergen Esser said on a call with analysts, adding that to increase its gross margin , the company needs to create the right balance between driving strong volumes and maintaining price increases while delivering strong productivity.
Thursday marks Danone’s fifth consecutive quarter of sales volume growth, and Unilever’s fourth.
Not all consumer groups have been able to slow price rises as much, still battling higher costs for some commodities like coffee and cocoa. Last week, Nescafe and Kit Kat maker Nestle cut its full-year outlook for organic sales growth to about 2%, after weaker than expected nine-month underlying sales growth.
($1=0.9275 euros)
(Reporting by Richa Naidu and Dominique Vidalon, editing by Mark Potter)
