- Rival Nestle beats sales forecasts and raises outlook
- Both firms able to hike prices thanks to strong brands
- Unilever to update investors next week
Investors in consumer goods giant Unilever (ULVR) will be taking heart from today’s positive third-quarter trading update from rival Nestle (NESN:SWX), the world’s biggest packaged food company.
After sales for the first nine months beat estimates, the Swiss firm raised its full year organic revenue growth guidance giving shareholders in Unilever hope the Marmite-to-Magnum group might do the same when it reports next week.
WHERE IS NESTLE WINNING?
The Swiss maker of Nescafe coffee, Maggi noodles and KitKat chocolate bars posted nine-month sales of SFR 69.1 billion, topping the consensus forecast of SFR 68.9 billion.
More importantly, like-for-like sales growth was 8.5% against expectations of 8.3% leading the company to increase its outlook for the full year.
Growth was mostly due to price increases, which averaged 7.5%, while underlying growth - or real internal growth as the company calls it - was ‘resilient’ at 1% for the first nine months.
Price increases were greatest in North America at 11.2% while in Europe prices only went up 5.7%, helping real internal growth to rise 1.5% or more than group average.
In China and Latin America - both key markets for Nestle and Unilever - the Swiss firm raised prices by 2.6% and 10.5% respectively and still managed to keep real internal growth positive.
Coffee sales grew at a high single-digit rate despite a 5% price hike for Nespresso, while confectionary, infant nutrition, pet food and water all recorded double-digit growth, demonstrating the power of the company’s brands despite tougher economic conditions.
‘We delivered strong organic growth as we continued to adjust prices responsibly to reflect inflation’ said chief executive Mark Schneider.
‘Our real internal growth remained resilient despite a high base of comparison and continued supply chain constraints, with limited demand elasticity. We remain confident in the strength of our brands, operational execution and underlying category dynamics which position us well for future growth’, added Schneider.
WHAT MIGHT UNILEVER SAY?
The UK consumer goods firm is due to update the market on third quarter trading next Thursday, 27 October, and as with Nestle all eyes will be on like-for-like sales growth.
In the half-year report at the end of July, chief executive Alan Jope reported underlying sales growth of 8.1% ‘driven by strong pricing to mitigate input cost inflation, which as expected had some impact on volume’.
Sales of Unilever’s ‘billion+ Euro brands’ were up an even more impressive 9.4% on an underlying basis, with strong growth in the US and India, while China sales were hampered by continuing lockdowns which is likely to be the case again in the third quarter.
China notwithstanding, Jope was confident enough to raise his guidance for full year organic sales growth to above the top end of his previous range of 4.5% to 6.5% driven by further price increases ‘with some further pressure on volume’.
Even if there is no increase in guidance next week, as long as nine-month organic sales meet the latest target there is every chance Unilever shares could stage a rally back to their recent highs.
