Consumers and retailers in Europe are much less keen than their US counterparts to pay increased costs for a variety of shopper items, in accordance with trade executives, analysts and economists.
Figures from corporations together with Unilever, which makes merchandise together with Hellmann’s mayonnaise and Vaseline, and Procter & Gamble, whose manufacturers embody Ariel detergent and Pampers nappies, confirmed gross sales volumes in Europe final quarter have been weaker than within the US.
Shopper items producers have put up costs world wide to attempt to offset historic will increase in the price of uncooked supplies. Each Unilever and P&G raised costs on common roughly 10 per cent final quarter.
Consumers’ sensitivity to adjustments in costs — often called elasticity — varies significantly by product and native market, and never each firm has reported decrease volumes in Europe.
Nevertheless, weaker family funds in Europe had usually made it harder to cost extra with out sacrificing quantity, a number of executives mentioned. Shoppers additionally tended to be extra keen to modify to cheaper grocery store own-brand options in Europe, the place the “personal label” market is extra developed than within the US.
“We’re seeing increased value elasticities in Europe,” mentioned Graeme Pitkethly, finance director at Unilever. Volumes on the UK-based maker of Magnum ice cream bars and Dove cleaning soap fell 3 per cent in Europe however have been up 0.6 per cent within the Americas, regardless of comparable value will increase in each areas.
Pitkethly famous the prevalence of discounters reminiscent of Aldi and Lidl in Europe. He mentioned personal label merchandise have been making “some inroads” in some product classes within the continent, notably ice cream.
Andre Schulten, Procter & Gamble’s chief monetary officer, mentioned “inflation pressures in Europe weighed extra closely on consumption” throughout the quarter.
Macroeconomic information exhibits households in Europe have confronted steeper value will increase than within the US over the previous 12 months. Eurozone headline inflation peaked at 10.6 per cent in October and final month remained persistently excessive, at 6.9 per cent. Against this US inflation topped out at 9.1 per cent final June, and has now subsided to five per cent.
“Europe continues to be a high-pressure setting,” added Schulten, who additionally mentioned European shoppers have been “buying and selling into personal label” merchandise.
P&G, whose portfolio contains Gillette razors and Head & Shoulders shampoo, mentioned gross sales volumes declined 7 per cent in its major markets in western Europe, whereas they have been in “modest” optimistic territory within the US.
Even so, the corporate’s natural gross sales rose 8 per cent in these western European markets and 6 per cent within the US. Schulten mentioned P&G’s “shopper markets remained comparatively resilient” globally.
Martin Deboo, shopper items analyst at Jefferies, mentioned retailers in Europe additionally may exert “extra negotiation stress” on shopper items corporations than within the US.
He cited the bargaining energy of supermarkets reminiscent of Tesco and J Sainsbury within the UK, Ahold Delhaize within the Netherlands and Carrefour in France.
Bruna Skarica, economist at Morgan Stanley, mentioned: “It has been simpler for corporations to cross by way of value will increase to shoppers within the US”, the place demand is stronger.
