Price hikes help Unilever and Nestlé beat analyst estimates—but tariffs could push consumers to their limits
Unilever and Nestlé, some of the world's largest consumer companies, saw strong sales growth in the first three months of 2025 despite the looming threat of tariffs.
The rivals' growth came from higher demand for some premium products and price hikes to offset soaring cocoa and coffee prices.
Unilever's underlying sales were up 3% during the first quarter, with its personal care category bringing in the most business. The London-listed company's so-called power brands, contributing to 75% of the group's turnover, saw sales jump by 3%.
Unilever is in the middle of a shake-up that's seen key leadership changes and an overhaul in its business focused on streamlining and gaining market share from rivals. During the pandemic, Unilever began to lose shoppers amid price increases to offset costs.
Earlier this month, the company ousted its CEO Hein Schumacher, and put CFO Fernando Fernandez in charge.
Fernandez has had a single resounding message since taking on the top job: to make big changes at the consumer brand behind Dove soap and Vaseline cream.
Fernandez said the company's new direction would mean 'a ruthless obsession with the consumer' during Thursday's earnings call.
'We have a resilient portfolio, good momentum and, above all, a very clear sense of what we need to do,' the new CEO said.
Nestlé has faced similar struggles. The Swiss company behind KitKat and Nespresso also reacted to surging raw materials costs by jacking up the price tags on its products, which its chair, Paul Bulcke, said Nestlé 'went a bit too far with.'
However, as demand for its coffee and confectionery, such as Smarties and Quality Street, boomed in the first quarter, the company reported a 2.8% organic revenue increase, beating analyst estimates of 2.6%.
'We are trying to take as much price as we can to cover our costs while being mindful of the consumer response in a competitive environment,' CEO Laurent Freixe said, Reuters reported. 'Some political decisions, economic decisions taken have rather undermined already soft consumer confidence."
Nestlé, too, is undergoing a shift in its business to focus on 'billionaire brands,' or its strong-performing suite of brands that can become engines of growth. The Vevey-based company plans to slash $2.8 billion in costs by 2027.
Consumer companies like Unilever and Nestlé constantly jostle over pricing to deliver strong top-line figures without upsetting shoppers. The subject became sensitive in the economic aftermath of the pandemic when cash-strapped consumers alienated big brands amid high inflation in favor of the best deals.
Tariff talk in the U.S. threatens to bring some of those pressures back, as experts worry about the medium-term impact of additional levies on broader consumer sentiment. This is set against the backdrop of eye-popping cocoa and coffee prices, the key ingredients in some of Unilever's and Nestlé's top products.
Given that their products are sold worldwide, Unilever and Nestlé have expansive manufacturing presences across regions. Nestlé, for instance, makes roughly 90% of its U.S. products within the country, shielding it from the worst impact of tariffs.
However, the companies also count the U.S. as their biggest market in most product categories, making demand from the country critical to their financial health.
How consumers cope with a changing global order will determine demand for the consumer goods the two companies make. Unilever noted 'declining consumer sentiment,' while Nestlé said political and economic decisions dented 'already soft consumer confidence.'
On Wednesday, British consumer company Reckitt Benckiser, which makes Dettol cleaning liquids and Strepsils lozenges, also warned of wavering consumer confidence. These challenges could determine demand in the competitive market for consumer goods through 2025.
'While the full picture on tariffs is still unfolding, our analysis suggests that, at this stage, the direct impact on our business will be limited,' Fernandez said.
Meanwhile, Nestlé's CFO Anna Manz warned that tariffs may hurt select parts of its business, such as bottled water and Nespresso capsules. The Swiss giant said it would cut prices by 1% in the U.S. to maintain its appeal with American shoppers.
While Nestlé and Unilever's size and scale provide ample cushioning, they'll still have to watch for private labels offering the same products at lower prices.
"The number of retailers that have developed the capabilities of the multinational consumer companies has increased quite significantly," Aftab Hussain, managing director and senior partner in BCG's consumer and retail team, told Reuters. "You're seeing innovations come through from retailers on private brands that's actually ahead of the (bigger) brands."
This story was originally featured on Fortune.com
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Yahoo
4 hours ago
- Yahoo
Britain to allocate $116 billion to R&D in spending plan
LONDON (Reuters) -British finance minister Rachel Reeves will allocate 86 billion pounds ($116 billion) in this week's spending review to fund research and development, the Department for Science, Innovation and Technology (DSIT) said on Sunday. It said the package, funding everything from new drug treatments and longer-lasting batteries to artificial intelligence breakthroughs, would be worth over 22.5 billion pounds a year by 2029/30, driving new jobs and economic growth. Reeves will divide more than 2 trillion pounds ($2.7 trillion) of public money between her ministerial colleagues on Wednesday, making choices that will define what the year-old Labour government can achieve in the next four years. The DSIT said the announcement on R&D follows Reeves' commitment last week to 15.6 billion pounds of government investment in local transport in city regions in the Northern England, Midlands and the South West. ($1 = 0.7398 pounds)
Yahoo
8 hours ago
- Yahoo
It's no wonder that the middle classes are fleeing Rachel Reeves's anti-wealth island
A brain drain is coming. We need to talk about emigration. Yes, you read that right, emigration – not just immigration. You heard the warnings during the Brexit wars – business and investors will leave for Paris, Frankfurt, Milan (and the Earth will stop spinning...) unless we remain in the customs union – and back then it was largely a load of hot air. But hear me out. This time, it's actually happening. Entrepreneurs and businesspeople are fleeing in their droves. In the past year alone, more than 10,000 millionaires have left the UK. Only China saw more high net-worth individuals leave. European countries are now stealing our lunch, with Italy and Portugal styling themselves as destinations for investor flight with attractive low-tax regimes. It wasn't Brexit that did it, but an economically illiterate tax regime determined to squeeze the juice dry. The best-paid 1 per cent already paid about a third of all income tax collected: those with the broadest shoulders were – and still are – bearing the greatest burden. But the Chancellor viewed successful investors and risk-taking entrepreneurs as criminals to punish, rather than assets to court. The non-dom tax changes may have polled well in focus groups, but they've backfired – and the public will now pay the price. Who is going to fund increases in defence, healthcare and transport spending? Yet again, it will fall to the middle classes to bridge the gap left. The Chancellor's ineptitude means further tax rises on working people in the autumn are now inevitable. The social contract with the middle class hasn't simply frayed – it's been shredded. They have been disproportionately targeted to fund a record tax burden while their quality of life has remained largely stagnant. They're paying more than ever to get less than ever in return. The public services they use are crumbling, the streets they walk feel less safe, and the town centres they visit are hollowed out by petty crime and boarded-up shopfronts. In France, discontent leads to riots; in Britain, it seems to dissipate into despair. The very real risk now is that Brits vote with their feet and simply pack up and leave en masse. A recent poll showed that nearly a quarter of UK adults are considering moving abroad in the next five years. These are highly skilled professionals who are the bedrock of any country: 48 per cent of those in the IT industry are considering emigrating, as are 30 per cent of those in the healthcare sector. And it's not just white-collar workers, either – when I speak to tradesmen, they think they would have far better prospects in countries such as Australia and Canada. This is no longer an issue of investor flight, but a full-on brain drain. In the 1970s, a high-tax and anti-business environment led to Britain experiencing a net loss of 500,000 people. Half a century later, history could well repeat itself. Even my generation, now pushing into our 40s, who didn't feel like we had it particularly good entering the jobs market in the 2000s, and with the massive house-price boom of that period, had it so much better. When I speak at universities, I am struck by how many are contemplating opportunities abroad. And who can blame them? Young graduates today pay more than ever to live in tiny bedrooms in shared flats. The prospect of homeownership – or starting a family – has never been more distant. Unlike previously, the alternatives to the UK are increasingly appealing. Their money can go further elsewhere, and they can live in more prosperous countries with a better quality of life. In 2007, the average Brit was richer than the average American, Australian, Austrian, Belgian, Canadian and German, to name just a few. Now, they have all overtaken us. And it's not just them. Finland, the UAE, Hong Kong and Israel have all sailed past us when it comes to GDP per capita. A failed policy consensus of the past 20 years has driven this country into decline – and now the consequences are upon us. We won't return to being a country of net emigration anytime soon. Quite the opposite: Starmer's immigration White Paper was a recipe for more mass legal and illegal migration. That means hundreds of thousands more migrants who, over their lifetime, will take out more then they put in – many of whom are from culturally divergent countries. Meanwhile, net contributors are pushed towards the exit. On average, a millionaire leaves the country every 45 minutes, while an illegal migrant enters the country every 15 minutes. It's the most brain-dead migration policy imaginable. I don't just fear for the raw economic consequences. If middle-class flight takes off, the foot will slam on the accelerator driving the dizzying pace of change. Brits who have grown up here and are imbued with our history, heritage, culture, customs and traditions can't simply be swapped like-for-like. Nations, like all good things, take an age to create but are easily destroyed. Many Brits can sense that the country they love is slipping away: at first gradually, then suddenly. I understand why people consider leaving the UK, although I could never, ever imagine it myself. I too despair sometimes, but I care too much to just shrug my shoulders and resign myself to defeat. We have a fight on our hands to turn this country around. But safe streets, cohesive communities, cheap energy, functioning public services, higher wages and a startup culture are never unobtainable. For all our problems, this is a great country – and I'm convinced we can be greater still. Broaden your horizons with award-winning British journalism. Try The Telegraph free for 1 month with unlimited access to our award-winning website, exclusive app, money-saving offers and more.
Yahoo
10 hours ago
- Yahoo
Councils fly flags to support Ukraine – but block defence spending
Councils are flying flags for Ukraine from their town halls while blocking investment in the British defence industry. At least a dozen English councils have passed motions to 'divest' from defence companies because of the war in Gaza, or have taken steps to reduce their holdings in arms companies. A report by two Labour MPs has found that defence companies have missed out on at least £30 million in investment because of action taken by local councils to focus their pension funds on 'ethical' firms. Despite this, several of the councils have displayed the Ukrainian flag from their town halls in solidarity against Russia. The MPs, Luke Charters and Alex Baker, said there was 'untapped potential' in local government pensions that could be used to boost investment in the defence sector, which often struggles to access finance. They argued that supporting British defence companies would help Ukraine, which has received more than £18 billion in military and humanitarian support from the UK. The MPs said there was a 'concerning trend among UK councils to divest from defence, with at least a dozen authorities implementing partial or full exclusion policies since 2022'. The MPs did not name the councils, but The Telegraph has found evidence of town halls in London, Bristol, Somerset, Oxford and Dudley where motions have been passed banning defence investment in support of Palestine. Dudley council, which is under no single party's overall control, passed a motion to divest from defence companies with the support of Labour and Liberal Democrat councillors. The council has flown the Ukrainian flag several times since the Russian invasion in February 2022, and lit up its town hall in blue and yellow. Labour-run Manchester city council, which voted to pressure its pension provider to abandon weapons manufacturers in November last year, has celebrated Ukrainian independence day and spent £50,000 to support Ukrainian refugees arriving in the city. The motion noted that councillors 'recognise the inextricable link between war, climate destruction, and human suffering' and that 'armed conflicts not only result in loss of life, including civilians and children, but also lead to intense environmental destruction'. Labour-run Waltham Forest Council, which announced plans to sell all defence investments in August last year, has hosted events for Ukrainian residents affected by the 'crisis' in their home country. Mr Charters told The Telegraph: 'With war on our continent, this is not the moment for councils to pull back from investing in UK defence. 'Firms and financiers have been clear when we have engaged with them: barriers like weak demand signals, short-term contracts, divestment, and regulatory uncertainty are holding the sector back. 'Our report calls for urgent engagement with local government pension schemes – and sets out 12 reforms to help unlock the capital and credit our defence sector needs to grow. 'Financing sovereign defence isn't optional – it's vital to our security and economic future.' The report's findings also include an apparent admission from the parliamentary pension scheme for MPs that their savings are often deliberately not invested in defence. A letter to the MPs from the chair of the fund said that while there was no specific ban on defence investments, 'environmental, social, governance and climate change issues tend to be more pronounced in some defence companies'. Mr Charters and Ms Baker said: 'There needs to be a holistic review by officials to understand how public investment vehicles are performing when it comes to defence sector investment. 'The UK cannot afford to miss this moment due to outdated ethical aversions. 'Defence investments represent not only a financial opportunity, but also an ethical obligation to secure the nation's future amidst an increasingly volatile geopolitical landscape.' Dudley council, Manchester city council and Waltham Forest council have all been approached for comment. Broaden your horizons with award-winning British journalism. Try The Telegraph free for 1 month with unlimited access to our award-winning website, exclusive app, money-saving offers and more.
