The increase in the cost of raw materials and supplies is one of the secondary effects that the pandemic has left in the global economy. Raw materials such as soybeans, wheat or coffee registered increases of between 30% and 65% this year, also in line with the increases registered by the price of oil, which rises almost 60% in 2021. The fact of That food and consumer companies are able to transfer the increase in costs to their prices and that this does not affect the demand of their customers will be the main challenge they will face in the coming quarters.
Some companies in the sector, such as Danone in France and Deoleo in Spain, have already taken advantage of the presentation of results for the third quarter to anticipate that they will transfer this increase in costs to the price of their products. “In general, large retail companies can better defend themselves due to their purchasing power against smaller producers and the possibility of raising prices to the final consumer,” explains Nicolás López, Singular Bank’s director of equity analysis. The expert believes that “the published results of the third quarter have defended themselves better than expected, but they could have problems if the inflationary rebound continues.”
Thus, analysts see clear winners in the sector despite the situation. Heineken is one of the UBS bets. The investment bank favors this company, which it has as its favorite option in the European beverage sector. They believe that it has been well positioned during the crisis and will be able to improve its competitive position.
One of the key drivers is the strength of pricing power, particularly in their emerging markets, which they hope will be evident in their results. UBS also believes that Heineken can recover the European margin levels of 2019 by 2022.
Within the sector they also bet on the German HelloFresh, from which they expect to increase their income more than 3 times during 2019-23, thanks to the leadership of the brand, among other aspects. Bankinter also bets on this young company since it has an “almost unique innovative product that consists of preparing and sending semi-prepared menus of fresh food”. HelloFresh’s success on the Stock Market is undoubted. In the year it accumulates a revaluation of 41% and closed 2020 with a profitability of 240%.
Unilever is another company that has decided to raise prices. “We believe that it is a correct business decision when you are the market leader given the magnitude of inflation, even if it meant an impact in the short term. In the case of Unilever, the most remarkable thing is that its market share strengthened, not decreased, as might be expected ”, they explain from Barclays. Sabadell also bets on this company even though it has confirmed that there is greater pressure on costs, something that will continue in 2022. To this end, Unilever will continue with measures to improve productivity and price increases (selectively both in products and in countries).
In the section of mass consumption, Lucas Maruri, from Gesconsult, points out that it is necessary to select the companies with the best pricing power and points out that they have Adidas and Nike in their portfolio. On the other hand, they would avoid others such as H&M, “which will suffer more in margins because it is less able to raise prices, and which is also affected by the increased cost of transport.”
.
#Stock #market #winners #price #escalation