Reckitt Benckiser has posted a forecast-beating 5.6% rise in first-quarter like-for-like revenue, boosted by increased prices to offset soaring costs.
In recent days, consumer goods giants such as Unilever, P&G, and Nestlé have confirmed further rises in their prices in the face of higher supply chain, commodity, and energy costs that have been accelerated by the war in Ukraine.
Reckitt revealed today that cost inflation in its business had increased to percentages in the “high teens”, with the input environment remaining “highly volatile and unpredictable”.
“It has become more adverse since our last market update in February due to the ongoing war in Ukraine,” the firm added.
Reckitt raised prices by 5.3% during the quarter and said it now expects full-year like-for-like net revenue growth towards the upper end of its forecast of 1-4%. Analysts had expected a rise of 1.5% in the first quarter.
However, the group said its operating margin was no longer expected to expand this year but would be in line with previous years “despite significant cost inflation”.
In recent days, several firms and market analysts have warned that demand for branded goods is likely to wane in the months ahead as cash-strapped consumers start switching to cheaper own-label products to save money. Reckitt’s volume’s edged up just 0.3%, although it stressed it was gaining or holding market share in key categories.
“We’re very conscious of our competitive position, of our price gaps versus competitors,” said Chief Executive Laxman Narasimhan. “We’re looking at price points and ensuring consumers have a range of price points.”
Demand for Reckitt’s Lysol and Dettol disinfectants skyrocketed at the start of the pandemic as households and businesses adopted stringent cleaning routines, but that has abated as pandemic restrictions have eased.
A 30% drop in Lysol sales during the quarter contributed to sales in Reckitt’s Hygiene division falling 9%. However, its Health unit saw revenues grow 20.6% as sales of OTC products surged due to a combination of the Omicron variant and a rebound against a historically low cold and flu season last year when Covid restrictions meant less transmission of other viruses. Demand for its Durex condoms and vitamins were also strong.
Narasimhan concluded: “As we look to the balance of the year, the operating environment remains highly unpredictable. We are well placed to address these market dynamics through the strength of our brands, our favourable product mix, our productivity program and the responsible pricing initiatives already undertaken, with scope to take further actions.”
NAM Implications:
- Encouraging results…
- With Reckitt managing expectations in reflection of
- market volatility
- cost price inflation
- sensitivity to relative competitive appeal
- Add to this the similar signals coming from other big players…
- All pointing to more volatility/uncertainty re consumer reaction to double-digit shelf price inflation in many categories.
