30/10/26
FMCG brands continue to warn on inflation
Consumers remained resilient despite the inflationary environment, but the
leading brands will be keeping a close eye on costs, writes Will Collins London,
30 October (Argus) — Global fast-moving consumer goods brands tracked by Argus
saw continued volume growth in the third quarter. But they also continued to
warn on inflationary pressures, with indications that they would be strictly
controlling costs, which may concern recyclers looking for indications on demand
for premium packaging-quality recycled materials. Consumers broadly resilient
Seven of the eight brands that we track regularly have now reported their
third-quarter sales volumes, or nearest equivalent measure. All but one
continued to see year-on-year growth, although the average growth rate across
the group declined slightly to 2.16pc, from 2.58pc in the second quarter.
Several firms noted that consumer behaviour had remained broadly resilient
during the quarter, despite the higher-cost environment: Danone chief executive
Juergen Esser: We increased prices selectively in the US, we increased prices
selectively in Europe. To date, we have not seen any significant price
elasticities. When you look at our performance over the last quarters in the US
or Europe, there's no significant impact from that. Nestle chief financial
officer Anna Manz: Looking at our performance in a bit more detail, we delivered
another good quarter of real internal growth [RIG] led growth, and within RIG,
the majority is coming from volume rather than mix, meaning that consumers are
eating and drinking our products more. Procter & Gamble chief executive Andre
Schulten: In aggregate, the consumer is resilient. We see 2-3pc, 2.5-3pc value
growth across all categories globally. That is unchanged, maybe a little bit
better than what we saw and reported last quarter. But Pepsico, which saw
volumes decline by 1pc year on year in the quarter, and Coca-Cola, which saw 5pc
volume growth, both noted pressure on consumers owing to inflation and the
geopolitical situation: Pepsico chairman Ramon Laguarta: Now, overall, the
consumer is, I would say, stressed all over the world. We see the consumer
making very choiceful decisions in many parts of the world. Coca Cola chief
executive Henrique Gnani Braun: Geopolitical disruptions affect several parts of
the world, cost pressures have accelerated, and all of this has an impact on
many consumers. I think the underlying pressure across the consumer landscape is
there, and I think it will be there for the rest of the year as we go into 2027.
Price isn't right While volumes were largely resilient, several firms gave clear
indications of the impact of rising prices for oil-based feedstocks — and other
commodities such as agricultural product and palm oil — on their businesses.
They noted that they would be keeping a close watch on costs in the near term:
Unilever chief financial officer Srinivas Phatak: You will appreciate that crude
has continued to be high over the past few months. Our current view for full
inflation for this year is about €900mn… from a 2027 perspective, we expect
inflation to be somewhere in the range of €700mn-1bn [$780mn-1.1bn]. So I would
say give or take about 2.5-3.5pc of the cost base. Schulten: This outlook [for
the June 2026-May 2027 financial year] includes a cost headwind of approximately
$1.4bn after tax, driven by higher raw material, energy and transportation
costs, and other premiums resulting primarily from the conflict in the Middle
East. Due to the duration of higher oil prices, we now expect materially higher
cost headwinds in [the 2026 fourth quarter]. Manz: As we look forward to 2027,
it is an inflationary environment. It is likely we will see more pricing. While
there may be a short-term consumer reaction, because there occasionally is in
the quarter that you take the price, we are confident that over the medium term,
that we can sustain both real internal growth and price. Obviously we are in a
substantially more inflationary environment than we were. That said, you will
see us continue to drive cost savings hard. One element that definitely affected
the companies' bottom line is higher costs for packaging materials. Argus' key
virgin PE, PP and PET prices have been 16-36pc higher on average — dependingon
grade — so far this year compared with January-October 2026. On one hand, this
has narrowed the differential to high-end recyclate prices, which may make them
more attractive. But tighter cost control may also increase the chance of firms
looking to realise savings in negotiations for 2027 recyclate offtake. All the
companies for which data are available have reported incremental percentage
increases in recycled plastic in their packaging during the past 5-6 years.
Their average reported recycled content usage was just over 20pc in 2025, or a
total of 1.6mn t across all the firms combined. Recyclers will hope they want to
keep this momentum going in the coming year. A bonus, primarily for European
recyclers, will be recent legislative changes that could mean firms can save
money by using more recycled content in certain markets. The Dutch producer
responsibility organisation Verpact will offer bonuses of up to €775/t against
extended producer responsibility fees for using recyclates in non-beverage
contact-sensitive PET packaging, and up to €650/t for contact-sensitive
polyolefin packaging from next year. In the UK, packaging producers will only be
able to use post-consumer recyclates to reach the 30pc content threshold needed
to avoid the UK Plastic Packaging Tax, as post-industrial material will be
excluded from 1 April. Based on this year's tax level, the implied cost
advantage for recyclates would be a little over £760/t ($1,013/t). Recyclers are
likely to be making these points to their customers, to position themselves as a
cost-saving option for the year to come. Send comments and request more
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