Nestle and Unilever see share prices diverge on rival price-hiking strategies

By Louis Goss

Nestle and Unilever shares took opposite courses on Thursday as the two top consumer goods giants were hit with the results of their varying efforts to win over inflation-hit customers.

Unilever shares jumped 6% on Thursday after the British multinational said it had successfully boosted its sales by volume in line with its push to draw back financially squeezed consumers who are increasingly switching to rival low-cost brands. Unilever shares are up 22% this year.

The British multinational, which sells Lipton tea and Ben & Jerry's ice cream, had previously decided to slow down its price hikes after seeing its sales drop in 2023 as a result of consumers switching to lower-price own-brand alternatives.

This saw Unilever (UK:ULVR) (UL) which also makes Dove Soap and Hellmann's mayonnaise, report a 2.2% increase in its second-quarter sales, to EUR16.1 billion , as it successfully boosted the volume of goods it sold by 2.6% and achieved underlying sales growth of 3.9%.

Unilever said it had slowed its price hikes, from rates of 2.8% in the final quarter of 2023 to average rates of 1.6% in the first half of 2024 and just 1% in the second quarter.

Unilever's higher sales were driven by a 7.1% increase in sales from its Beauty & Wellbeing division on the back of 5.1% growth in volumes driven by strong sales of brands including Dove soap, Vaseline as well as its high-end beauty brands.

This offset slow growth in its ice cream business - which the conglomerate previously said it was looking to sell - driven by a 1% drop in sales by volume, which Unilever blamed on soft sales in China and the disappointing summer weather in Europe.

Nestle (CH:NESN), by contrast, saw its stock price drop 4% on Thursday as the Swiss conglomerate reported a 2.7% drop in its first-half sales, to 45 billion Swiss francs ($51 billion). Nestle shares are down 9% in the year-to-date.

The slump in Nestle's revenue was the result of a drop in its sales by volume, after the firm raised its prices at faster rate than its rival Unilever.

This price hiking strategy saw Nestle post a tiny 0.1% increase in its key real internal growth (RIG) metric - which measures the volume of products sold - after it previously hiked its prices by average rates of 2% in the first half of 2024.

Nestle, which makes products including Kit Kat and Nespresso, hiked its prices by 7.5% in 2023, in response to high levels of inflation, leading to a slump in its real internal growth metric.

Nestle achieved its highest levels of growth in its coffee business as the Swiss company saw its dairy products business achieved the slowest growth. The company said its sales by volume declined in its developed markets while remaining flat in its emerging markets

-Louis Goss

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07-25-24 0749ET

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