Consumers and retailers in Europe are much less prepared than their US counterparts to pay greater costs for a variety of client items, in response to trade executives, analysts and economists.
Figures from firms 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 had been weaker than within the US.
Client 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 — referred to as 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 typically made it tougher to cost extra with out sacrificing quantity, a number of executives mentioned. Customers additionally tended to be extra prepared to modify to cheaper grocery store own-brand alternate options in Europe, the place the “non-public label” market is extra developed than within the US.
“We’re seeing greater 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 had been up 0.6 per cent within the Americas, regardless of related value will increase in each areas.
Pitkethly famous the prevalence of discounters akin to Aldi and Lidl in Europe. He mentioned non-public label merchandise had 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 knowledge 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 surroundings,” added Schulten, who additionally mentioned European customers had been “buying and selling into non-public label” merchandise.
P&G, whose portfolio contains Gillette razors and Head & Shoulders shampoo, mentioned gross sales volumes declined 7 per cent in its most important markets in western Europe, whereas they had 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 “client markets remained comparatively resilient” globally.
Martin Deboo, client items analyst at Jefferies, mentioned retailers in Europe additionally might exert “extra negotiation stress” on client items firms than within the US.
He cited the bargaining energy of supermarkets akin to 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 firms to go by way of value will increase to customers within the US”, the place demand is stronger.