The divide between retailers and brand manufacturers is growing: Coca-Cola, Danone, and Mondelez are raising their expectations for this year, while retail giant Walmart was forced to do the opposite.
Chocolate above all elses
Walmart is seeing its margins evaporate, while FMCG giants from Mondelez to Unilever are all raising their expectations for this year. Danone now expects comparable sales growth of 5 to 6 %, up from 3 to 5 % previously. In fact, sales grew 7.7 % last quarter, significantly more than analysts had expected. CEO Antoine de Saint-Affrique calls the first half of the year encouraging, even though he does think that the operating margin will be lower than last year.
Mondelez has even doubled previous forecasts for its full-year growth: the biscuit manufacturer is raising its turnover forecast from 4 % to 8 %. In the second quarter, the food giant recorded an impressive 5 % volume growthµ, despite higher prices. “While consumers (in developed markets) express growing frustration with rising prices for a broad range of goods and services, they continue to perceive chocolate and biscuits as affordable indulgences and an important pick-me-up”, CEO Dirk Van de Put told Reuters. In short, it does not really matter how much they cost.
Rather coke than clothes
Coca-Cola is also holding up extremely well. Last quarter, organic sales increased by 16 %, mainly thanks to price increases. Profits and margins, meanwhile, remain quite stable, even despite delivery delays and higher costs. The American beverage giant is now expecting double-digit sales growth (12 to 13 %) for the full year, as opposed to the 7 to 8 % predicted earlier.
Suppliers are managing to pass on their higher costs – average prices rose by 10 % this year at Unilever – but retailers are paying the bill. People are now spending less on higher-margin products like clothing or electronics, Walmart had to admit on Monday. Although sales for food are up, the retailer expects a lower profit, as consumers are now more sensitive to price promotions and count on their supermarkets to offer budget-friendly solutions. The competition between the supermarkets is thus flaring up, resulting in further margin pressure.