Big buyers are successful when consumers swallow high prices | So Good News

ZURICH/LONDON, Oct 19 (Reuters) – Nestle ( NESN.S ) and Procter & Gamble, two of the world’s largest consumer goods companies, reported better-than-expected sales on Wednesday, as consumers continued to pay more for products such as Nescafe coffee and Gillette razors. even record inflation.

Nestle, which also makes Cheerios cereal and KitKat chocolate, reported better-than-expected results, pushing higher prices for consumers as global food prices drive inflation.

Similarly, Tide detergent maker P&G beat sales and profit estimates for the quarter, helped by rising prices for everything from Head & Shoulders shampoo to Gillette razors, even as a strong dollar weighed on its earnings from foreign markets.

Retail companies – many of which thrived during the COVID-19 crisis when people stockpiled their goods – are also emerging as winners during the global crisis, saving double space as people are forced to pay more for everyday goods.

People are also eating at home more because the high cost of living prevents them from going out to restaurants. Demand for food and household goods has fallen more slowly than for smart goods such as clothing and electronics, as consumers prioritize spending on essential items.

“We’re also seeing consumers move to two different price points,” said P&G chief financial officer Andre Schulten.

“The consumer group is looking for value by trading up to major retailers to get a lower cost per job, or a lower cost per unit. And we’re seeing some buyers who have a lot of money, and they’re looking more at cash flow.”

The division has struggled over the past 18 months due to rising costs, but Nestle reiterated its target for a trading profit of around 17%.

Britain’s consumer spending increased by 10.1% in September, led by the biggest increase in food prices since 1980. Eurozone inflation also beat previous forecasts in September to around 10%. Prices during this period rose by 8.2% in the United States, stretching the pockets of consumers who are already spending a lot of money on gas and mortgages.

Nestle posted its strongest nine-month growth in 14 years and extended its full-year guidance. Organic sales, which cut out the effects of cash flows and acquisitions, rose by 8.5% in the nine months to the end of September. This was the biggest nine-month rise since 2008 and was driven by higher rates aimed at curbing inflation.

“We delivered strong returns while continuing to adjust pricing appropriately to reflect rising costs,” said the company’s CEO Mark Schneider.

P&G said average prices across its lines rose 9% in the first quarter ended Sept. 30, while sales volume fell 3%.

“We have made purchases in the last fiscal year for all 10 of our divisions,” said CFO Schulten.

Shares in Nestle rose 0.2%, while P&G rose 2%.

Their results are better for Unilever ( ULVR.L ) and manufacturer Dettol Reckitt ( RKT.L ), which both report results next week.

But despite the strong sales, some analysts worry that the price hike could push buyers too far, which could put some of its products out of reach for distressed prices that are seeing sales volumes drop.

“You worry about the price power group by category especially for non-essential foods – nobody needs KitKat or ice cream,” said Chris Beckett, head of market research at Quilter Cheviot.

“Sales volumes have been good so far but we are a way off from the recession.”

Nestle’s Schneider raised concerns about the “difficult” economy, which he said was eroding the purchasing power of many customers.

($1 = 0.9953 Swiss francs)

Richa Naidu, Uday Sampath Kumar, John Revill and Jessica DiNapoli report; Edited by Miranda Murray, Josephine Mason, Matt Scuffham, Jan Harvey and Catherine Evans

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