Sales of food giants shine: stressed consumers buy at high costs

First modification: 07/27/2022 – 17:42

Economists know it as “inelastic demand”, which accurately describes what seems to be happening globally in a context of unusually high cost of living: the demand for certain products increases, despite the fact that prices continue to rise stubbornly.

This concept is generally associated with basic necessities such as food, fuel or cleaning supplies. This is demonstrated by the financial results of some of the large multinationals, whose results for the second quarter exceeded Wall Street’s expectations.

The consumer giants report increases in their sales, even when they also do so in the prices of their products.

Unilever, owner of more than 400 well-known brands such as Knorr broth, Dove soaps or Hellmann’s mayonnaise, increased its sales by 8.8% in the second quarter, despite having raised its prices by an average of 11.2%.

For its part, Coca-Cola reported a growth in its revenues of 8% and 12% in its global prices. In addition, it agrees with its rival Pepsi Co in that demand continues to rise and that there is room for prices to continue to adjust upwards.

Coca-Cola Chief Executive James Quincey said the company would raise prices further in markets where costs were rising and aim to pass most of them on to consumers in the event of a recession.

In the quarter ending in June, McDonald’s reported global sales were up 10% and its CEO acknowledged it is considering adding more discount menu options because inflation is driving some consumers to buy cheaper items.

More food and less clothes

As investors closely watch corporate results for signs that economies are heading into recession, consumers are sending mixed signals.

Walmart issued a warning Monday: On the one hand, its American customers are shopping for groceries and other necessities, but on the other, they are skipping aisles packed with clothing and other non-essentials.

“Rising levels of food and fuel inflation are affecting how customers spend. We are now anticipating more pressure on general merchandise in the second half,” said Doug McMillon, CEO of the company.

For that reason, America’s top retailer has pledged to cut prices on apparel and general merchandise more aggressively to reduce spring inventory buildup.

with Reuters