Third-quarter results from the world’s leading consumer-goods companies attest to the generally robust global economic recovery after the Covid-related disruptions of the past 18 months.

“However, raw material prices and freight costs have surged this year across industries due to global supply-chain disruptions, which, with the addition of elevated energy costs, all have the potential to squeeze margins,” says Henrik Blymke, analyst at Scope.

“Still, the strong organic growth reported by many companies is encouraging, which we expect to continue through the fourth quarter, driven by solid demand in most geographies and product categories. The rebound from the Covid shock in 2020 is clear,” says Blymke. “We may see further price increases as energy supply problems in Europe and Asia push up energy costs while it will take time for supply-chain bottlenecks to ease.”

Most consumer good companies offset higher input costs with price increases in most markets, but that is likely to prove more difficult for companies which face tougher competition in emerging economies from cheaper local brands. Management will need to improve productivity to offset the increased costs or risk losing market share.

“In some of the more mature markets, consumer product companies with the strongest brands can look at pricing a bit differently. High brand value and innovation will allow these companies to gradually increase prices to offset the rising raw material costs,” says Barna Gáspár, analyst at Scope.

“Innovation is going to prove increasingly important in the context of the growing focus of consumers on sustainability, likely to see more reshuffling of product portfolios through M&A and R&D,” says Gáspár.

“For food and drinks companies, consumer demand for plant-based and vitamin/protein-enriched fare, coupled with investor and regulatory focus on sustainability, seem increasingly to favour companies with the products and production processes in line with the idea of a circular economy, with protection of the environment and well-being of farming communities in mind,” he says.

For more analysis of consumer product companies like Adidas AG, Anheuser-Busch InBev, Carlsberg A/S, Danone SA,  Heineken NV,  LVMH Moet Hennessy Louis Vuitton SE, Nestle SA and Unilever NV, please consult the credit ratings exclusively available on investor platform ScopeOne.