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TEXT-Fitch:Thrifty customers to challenge consumer sector in 2013
December 10, 2012 / 8:43 AM / 5 years ago

TEXT-Fitch:Thrifty customers to challenge consumer sector in 2013

Dec 10 - A combination of weak consumer spending and fierce price-based competition will maintain pressure on the European packaged food and consumer sector in 2013, Fitch Ratings says. These pressures will be partly balanced by solid, although slowing, growth in emerging markets and a conservative approach to corporate spending that will translate into generally positive free-cash-flow profiles across the sector.

Public sector austerity and high unemployment will continue to undermine both consumer confidence and purchasing power in 2013, particularly in southern Europe. Big ticket items will be the most affected, but countries experiencing deteriorating consumer confidence will also see shifts in buying trends for food and staple consumer products, including a move towards low-priced and private label goods, even outside of Europe.

Consumers’ focus on costs will feed fierce competition based on prices and promotions in developed markets. In turn, consumer companies are likely to trim marketing budgets in an attempt to protect margins, although this may only provide relief for a month or two in highly competitive markets.

Those companies with significant sales in emerging markets, such as Unilever and Henkel, are likely to be the most sheltered. Emerging markets represent 30% to 50% of sales for EMEA-based global consumer groups and sales growth will sit in a healthy 5% to 8% range in 2013, albeit down from high single digits or low teens in 2011 and 2012. In contrast, packaged food companies operating in just a single market may face the biggest challenges because of their lack of pricing power compared to international groups and those with the strongest brands.

In the face of these challenges, we expect companies to maintain conservative credit profiles in 2013 as lower capital expenditure plans and tight control over working capital help free-cash-flow margins to continue to recover from poor results in 2011. We also expect leverage will hold steady or decline slightly.

For more details on our outlook for the sector please see “2013 Outlook: EMEA Packaged Food and Consumer” published today on

Link to Fitch Ratings’ Report: 2013 Outlook: EMEA Packaged Food and Consumer

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