LONDON (S&P Global Ratings) May 16, 2023--Despite passing on higher prices to retailers and end-consumers, the latest financial reports from rated European consumer goods companies show that, so far, they have successfully defended their market positions. That said, the outlook for consumer goods in EMEA is mixed, S&P Global Ratings stated in the "EMEA Consumer Goods: Industry Overview, Credit Trends, And Outlook" report published today.
Strategic pricing and product mix management will be key to capture value and offset the impact of elevated costs. A decline in consumer spending and higher labor costs, however, are just some of the factors that could weaken margins in the medium term.
A decline in volumes, higher costs, and reduced pricing power in some sub-sectors meant that downgrades outnumbered upgrades in the past four quarters, while the share of negative outlooks in EMEA consumer goods is comparatively higher than in most other corporate sectors.
Persistent inflation and weaker economic conditions have varied impact across the different segments of consumer goods. Sub-sectors like consumer durables and sportswear are most impacted by lower volumes and working capital drag, but the allure for luxury goods, for example, endures. The premiumization trend will moderate rather than reverse for segments like alcoholic beverages, while packaged foods, home, and personal care are most exposed to high competition from private label products.
This report does not constitute a rating action.
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|Primary Credit Analyst:||Raam Ratnam, CFA, CPA, London + 44 20 7176 7462;|
|Secondary Contact:||Rocco A Semerano, London + 44 20 7176 3650;|
|Additional Contact:||Celine Huang, London (44) 77-9054-1330;|
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