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Several of the world’s largest consumer goods companies have quelled fears over a global contraction in household spending after their results showed shoppers were still stomaching price rises on a wide range of products from burgers to baby food and toilet rolls.
While some executives cautioned that customer budgets remain under pressure, companies on both sides of the Atlantic reported resilient first-quarter sales after they successfully passed on historic increases in the cost of raw materials to consumers.
Nestlé, the world’s biggest food company, pushed up prices by an average of almost 10 per cent in the first three months of the year — close to the fastest pace in more than three decades — yet sacrificed only a modest slice of its sales volume.
Mark Schneider, chief executive of the Switzerland-based group, said: “Compared to some of the fears that everyone had going into the winter, the European consumer has held up better than expected.”
Nestlé’s rival PepsiCo, maker of Doritos crisps and Quaker oats as well as the eponymous beverage, raised prices 16 per cent while sales volumes declined only 2 per cent.
Unemployment across developed economies has been lower than anticipated, while households in Europe have also benefited from more generous government support for energy bills and a decline in gas and electricity prices this year.
China’s emergence from its zero-Covid policy has also boosted domestic spending in the country.
“The consumer remains resilient,” said Michael Hsu, chair and chief executive of Kimberly-Clark, maker of Andrex toilet roll and Kleenex tissue.
The Texas-based household products group raised its outlook for full-year profits after a 10 per cent rise in prices helped it produce better than forecast first-quarter sales, even as volumes slipped 5 per cent. Gross margin improved 3.4 percentage points to 33.2 per cent. However, Hsu said the company’s margins remained beneath pre-pandemic levels. “We’re prioritising margin recovery,” he said.
McDonald’s, which also topped sales forecasts, said its US business benefited from “strategic menu price increases” during the period.
The latest batch of financial updates followed similarly upbeat quarterly results in recent days from US-based Coca-Cola and Procter & Gamble.
P&G, the world’s largest maker of household goods, lifted profit margins for the first time in two years after it pushed up prices for consumers at a faster pace than the rise in its own expenses.
Chris Kempczinski, McDonald’s chief executive, said that while demand was “strong”, customers were “being mindful about how they’re spending”.
He said the fast-food chain was monitoring “very closely” how consumers were reacting to higher prices and that the company was seeing “in some places resistance” to them.
In another sign of clouds on the horizon, a report from the Conference Board in the US showed consumer confidence in the country fell to a nine-month low in April.
Americans’ expectations about business conditions and the labour market softened in the weeks following the failure of several regional banks. Still, several corporate executives on Tuesday said they were hopeful the worst of the cost inflation — and financial pain for consumers — had peaked.
“We’re seeing a deceleration of inflation,” said Ramon Laguarta, PepsiCo chief executive. “We have mostly taken [increased] the pricing already this year that we needed to cover for our cost increases.”
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