Analysis of published financial results shows that across broad categories, Pet Care and Home Care performed strongly in Q2 2020, while Beauty & Personal Care suffered most
To get a sense of the pandemic’s impact on financial performance of CPG companies, we compared Q2 2020 underlying sales growth (organic, like-for-like etc.) with Q2 2019. This analysis highlights the shift in underlying performance between the two quarters, which is a good and broad metric to capture the how the pandemic affected companies. Contact us if you want more detail or analysis based on different metrics.
Broadly, using sales weighted average figures for a sample of companies and business segments, Beauty & Personal Care was the hardest hit category, with an almost 13 percentage point negative shift between the two quarters. Health and Food & Beverages fell around 3-4 points each, but Pet Care (+8.3pps) and Home Care (+6.6pps) saw substantial gains.
These category averages mask much larger changes at the company and business segment level.
Beauty & Personal Care – Negative Impact Across All Companies
Beauty & Personal Care fell across all companies assessed.
Focused Beauty companies, like L’Oréal and Shiseido, experienced strongly negative performance comparisons.
Shiseido’s -32.6% like-for-like Q2 2020 performance contrasted sharply with 9% growth the year before, resulting in an almost -42pps turn. Some segments (like the Japan and Americas businesses and Travel Retail) fared much worse than others.
All four of L’Oréal’s divisions posted far lower like-for-like growth in Q2 2020, with the luxury and professional units particularly hard-hit, posting reductions in underlying growth of 37pps and 34pps, respectively. Active Cosmetics, which is less dependent on Travel Retail, managed a +4.3% like-for-like growth in the latest quarter but still posted a 10pps negative comparison.
Beiersdorf’s derma brands performed strongly but could not prevent a negative turn of over 20pps for the Consumer business.
Beauty and Personal Care segments at Unilever and P&G didn’t see the same depth of impact as the pure beauty companies, which are more reliant on channels like travel retail and salons.
Food & Beverage – Mixed Outcome with Beverages Down, Packaged Foods Up
In Food & Beverages, businesses most focused on out-of-home beverages, like Coca-Cola and Nestlé Water, saw the most dramatic dip in underlying sales.
Some with a greater contribution from at-home sales were able to more than offset weakness in the out-of-home channels.
Coca-Cola’s EMEA business saw organic sales growth of -35% in the latest quarter, almost 40pps worse than the +4% in the year-ago quarter.
In comparison, Pepsi’s Quaker Foods business in North America had a +20pps comp after posting +23% organic in Q2 2020.
Health Care – Mixed Picture
Health Care showed very divergent performance across companies analysed. RB’s Health portfolio was up 6%, being well suited to COVID-19 trading conditions. It’s OTC category’s like-for-like sales were down 12.7% in the quarter and the infant and child nutrition business was -8.1%, but its Wellness and Health Hygiene brands (led by Dettol and VMS) grew 28.2%.
All the other businesses covered in the analysis fell.
Nestlé’s Nutrition & Health Science business posted a much lower organic growth rate in Q2 this year than last, even though the Health Science part of business had double-digit organic growth in the recent quarter.
P&G’s Health Care business grew 2% organically in the recent quarter but was up against a +10% comp a year ago.
J&J’s Consumer Health performance was diluted by sales declines in skin health and beauty, offsetting positive growth in oral care and OTC, both of which were positively impacted by the pandemic.
Home Care – Mostly Strong Performance
Home Care was a strong performer overall with both Clorox and RB’s Hygiene business showing positive double-digit comparisons.
All four of Clorox’s business segments posted double-digit growth in the latest quarter, led by +33% from the new Health & Wellness segment (including the new Vitamins, Minerals and Supplements business, the Laundry and Home Care units, and the Professional Products unit).
RB’s Hygiene business (including the key Lysol surface disinfectant brand) posted like-for-like sales of almost 20% in the latest quarter, up over 16pps on the year-ago quarter.
Unilever’s Home Care Q2 2020 underlying sales growth rate of +4.0% was up against nearly 9.0% growth in Q2 last year, leading to a negative 5pps shift quarter-to-quarter.
Pet Care – Up Across All Companies
All companies grew in Pet Care but the dominant impact came from the General Mills Pet business, which grew 37% on an organic basis in the latest quarter. However, this was mostly due to an extra month of sales, although it did see increased demand early in the quarter as consumers stockpiled.
Both Nestlé Purina and Colgate-Palmolive’s Hill’s pet care business posted organic sales growth in Q2 2020 of over 11%, ahead of their mid-single digit growth rates in Q2 2019. The Hill’s unit saw 50% growth in its online business during the quarter.
Notes on the analysis
Accounting periods differ between companies. Most reported to June 30, 2020, but some (notably General Mills and McCormick Foods) ended the quarter much earlier. Questions or requets, please contact us.[Image Credit: © Business360]
Henkel released results for Q2 and H1 2020 for the period to June 30, 2020 and issue a half year report.
H1 organic growth -5.2% (Q2 -9.4%):
Adjusted EBIT margin 12.6%, -370bps.
Henkel withdrew its 2020 forecast in April this year and has stuck with that decision.[Image Credit: © Henkel]
Beiersdorf announced its results for the first half of 2020, to June 30, 2020 and released a half-year presentation.
H1 organic sales -10.7%. Consumer -10.9% and tesa -10.0%.
Half-year sales in the Consumer business included:
The company provided no quantitative guidance for 2020 but said both business segments would see negative growth. [Image Credit: © Beiersdorf]
Clorox – Strong Growth Across The Segments, Led By Cleaning And Disinfecting Products
August 03, 2020
The Clorox Company reported its Q4 and Fiscal Year 2020 results for the period to June 30, 2020, and released supplemental financial schedules.
Organic sales +24% in Q4. Double-digit volume growth in all reportable segments from COVID-19 impacts, with consumers spending more time at home.
Q4 EBIT margin 170bbps to 21.1%.
Clorox expects organic sales growth of flat to low single-digits in Fiscal 2021, although it acknowledges the significant uncertainty surrounding future COVID-19 impacts. [Image Credit: © Clorox]
Colgate-Palmolive announced its Q2 and H1 results for the period to June 30, 2020.
The company says it continues to see elevated demand across geographies in certain categories - liquid hand soap, dish liquid, bar soap and cleaners – but consumers are working down their pantry inventories in other categories, and particularly in Europe.
Q2 organic sales +5.5% (organic volume +2.0%, pricing +3.5%):
Q2 gross margin +110bps to 60.8% (non-GAAP +120bps to 60.8%).
Q2 Operating margin +130bps to 24.3% (non-GAAP +30bps to 24.3%).
Colgate said it was not providing 2020 financial guidance at this stage.[Image Credit: © Colgate]
Church & Dwight – 8.4% Organic Growth, Driven Primarily By The Consumer Domestic Business
July 31, 2020
Church & Dwight published its Q2 and H1 results for the period to June 30, 2020.
The company says it continued to see a significant increase in consumer demand for many of its products, primarily in response to the COVID-19 pandemic.
In Q2, organic sales were +8.4%, with volume +4.9% and pricing/mix +3.5%, with the Consumer business +8.8%.
H1 organic sales growth +8.8%, with Consumer +9.1%.
Q2 gross margin +220bps to 46.8%. Margin on income from operations at 21.0%, up 360bps.
Organic sales growth outlook for 2020 raised to 7-8% (from 3.5%).[Image Credit: © Church & Dwight]
Kellogg released its Q2/ H1 results for the period to June 27, 2020.
Organic net sales +9.2% in Q2 (volume +10.3%, pricing/mix -1.1%):
The COVID-19 crisis elevated demand for at-home consumption, driving sales in retail channels that more than offset declines in foods sold in away-from-home channels.
In Q2, currency-neutral adjusted operating margin was +340bps to 16.5% (+170bos to 14.8% in H1).
The company raised its full-year financial guidance on the assumptions that at-home consumption growth will moderate to normalized levels by Q4, away-from-home demand will take longer to recover, and emerging markets will feel the impact of slowing economies. It expects organic net sales growth for 2020 to be around +5%. [Image Credit: © The Kellogg Company]
Amazon – Amazon Is Riding The Pandemic With Q2 Currency-Neutral Sales Growth Of Over 40% in Q2
July 30, 2020
Amazon.com Inc. announced its Q2 and H1 results for the period to June 30, 2020.
Currency-neutral net sales +41% in Q2.
Net sales growth in Q2 was +43% for North America, +38% International and +29% Amazon Web Services.
Online stores were +48%, physical stores -13%, third-party seller services +52%, subscription services +29%.
Operating margin was +170bps to 6.6%.
It expects net sales growth in Q3 of 24-33%, including unfavorable currency impacts of some 20 basis points.[Image Credit: © Amazon]
Anheuser-Busch InBev reported its Q2 and H1 2020 results for the period to June 30, 2020.
Improvement was clear as the quarter progressed: Volumes were -32.4% in April, -21.4% in May and +0.7% June.
Organic revenue -17.7% in Q2 (revenue per Hl -0.6% and volume -17.1%):
Normalized EBIT margin was -1090bps to 22.3% in Q2 and -770bps to 24.0% in H1.[Image Credit: © AB-InBev]
The Kraft Heinz Company reported financial results for Q2/H1 2020 for the period to June 29, 2020.
Organic sales growth +7.4% in Q2 on higher retail demand more than offsetting lower sales from foodservice. Pricing +2.2% and volume/mix +5.2%:
Keurig Dr Pepper – Positive Constant Currency Growth In Q2 Despite -16% For Beverage Concentrates
July 30, 2020
Keurig Dr Pepper reported financial results for Q2 and H1 2020, for the period to June 30, 2020.
Q2 constant currency net sales +2.9% (volume/mix growth +4.3% and net price realization -1.4%):
COVID-19-related operating costs in Q2 were $75 million.
For full-year 2020, the company continues to expect constant currency net sales growth of 3-4%. [Image Credit: © Keurig Dr Pepper]
Nestlé – Mixed Picture Across The Categories, Small Positive Organic Growth Overall In Q2
July 30, 2020
Nestlé published half-year 2020 results for the period to June 30, 2020.
H1 organic growth +2.8% (real internal growth +2.6% and pricing +0.2%)
After a strong Q1, organic growth moderated in Q2 to +1.3% as movement restrictions on the out-of-home channel and consumer destocking impacted sales.
There was “sustained momentum” in the Americas and “positive sales development” in Zone EMENA, but sales dipped in Zone AOA (although growth was positive in Q2). Organic growth was +4.1% in developed markets and +1.1% in emerging markets.
Purina PetCare was the fastest growing of the categories, followed by dairy. Prepared dishes and cooking aids grew mid single-digits. Coffee was positive, buoyed by at-home sales. Nestlé Health Science drove positive growth for Nutrition & Health Science, but water and confectionery posted negative growth on exposure to the out-of-home channel.
Organic growth in Q2 was 1.3%, but Nestlé doesn’t provide Q2 regional and category numbers. Based on our own estimates, organic growth in the quarter was up around 11% for milk products & ice cream and PetCare, about +3% for prepared dishes & cooking aids, and negative for all other categories (with water down around 18%). In the regions, Zone AMS was up 3-4%, Zone AOA slightly positive (about +0.2%), but Zone EMENA down over 2%.
Underlying trading operating margin 17.4%, +30bps (reported margin +140bps to 16.9%).
COVID-19 effects on H1 organic growth varied by:
For the year as a whole, the company expects organic sales growth of 2-3%. [Image Credit: © Nestlé]
Danone published its Q2 and H1 2020 results for the period to June 30, 2020.
Like-for-like sales -5.7% in Q2:
LFL sales -1.1% for H1.
H1 “Recurring Operating Margin” down72bps to 14.0%, including a 93bps hit from COVID-19-related costs.
Danone chose not to provide guidance for 2020 at this time.[Image Credit: © Danone]
L’Oréal – LFL Sales Down Almost 20%, Only Active Cosmetics Posted Positive LFL Sales Growth
July 30, 2020
L’Oréal announced its Q2/H1 2020 results for the period to June 30, 2020.
Q2 like-for-like growth -18.8%:
P&G announced Q4 and full-year 2020 results for the period to June 30, 2020.
Q4 organic sales were +6% (organic volume +3%):
The Q4 volume growth was primarily from innovation programs and higher sales of household cleaning, personal health and cleansing products, particularly in North America and China, partially offset by the impact on consumer access to retail markets.
In the Beauty segment, Skin and Personal Care organic sales were down low single digits, but Hair Care was up high single digits. In Grooming, Shave Care down mid-single digits but Appliances up double digits. In Health Care, Oral Care decreased low single digits and Personal Health Care organic up double digits. In Fabric and Home Care, Fabric Care up high single digits, Home Care up over 30% as sales surged in home cleaning and dish washing. In Baby, Feminine and Family Care, Baby Care down high single digits, Feminine Care up mid-single digits, and Family Care up over 20%.
Reported gross margin +180bps to 49.5% and core gross margin +210bps (+250bps on a currency-neutral basis) to 50.9%.
Reported operating margin up over 5pts to 19.7%, and core operating margin +140bps (+190bps currency-neutral) to 21.0%.
For 2021, P&G expects all-in sales growth of 1-3% and organic growth of 2-4%.[Image Credit: © Proctor & Gamble]
Kao released its six-month results for the period to June 30, 2020.
Net sales growth -4.3% on a like-for-like basis: Consumer Products -4.1% (Cosmetics -20.7%, Skin Care and Hair Care -0.3%, Human Health Care -3.7%, Fabric and Home Care +6.2%), and the Chemical business -5.2%.
Operating margin +80bps to 12.0% (Consumer Products +80bps to 11.8%).
In the regions, the Consumer Products business was -4.7% in Japan, flat in Asia, -2.5% in Americas, and -14.3% in Europe.
Sales decreased 7.5% compared with the same period a year earlier to 551.1 billion yen. On a like-for-like basis, sales decreased 4.1%.
The Consumer Products business experienced mix effects from COVID-19 pandemic: the Cosmetics Business and sales to hair salons were adversely impacted significantly, but demand for hygiene-related and other products were up.
Kao expects the uncertain business environment to endure into Q3 and beyond.[Image Credit: © Kao Corporation]
Mondelēz International reported its Q2/H1 2020 results for the period to June 30, 2020.
Q2 organic growth +0.7% (volume/mix -1.3% and pricing +2.0%):
Adjusted operating margin -80bps to 15.9%.
The company chose not give full-year financial outlook. [Image Credit: © Mondelez International]
RB released its Q2/H1 results for the period to June 30, 2020 along with a presentation.
Like-for-like growth +11.9% (volume +11%) in H1: Hygiene +16.1% on Lysol and Finish growth, as well as “strong double digit growth” in North America, Europe/ANZ and most emerging markets; Health +9.3%, with Dettol and Airborne more than offsetting OTC pantry unloading and other areas of weakness. e-commerce sales up over 60% (~12% of H1 revenues). RB estimates a 9-10% COVID-19 tailwind in H1.
RB said that although COVID-19 has been a challenge for the business, it also provided an opportunity to expand plans and “capture new growth”, especially in disinfectant – including e-commerce and a new professional channel. It will invest a further £100m over the next 24 months to accelerate growth in its disinfectant brands, the digital and e-commerce channel, and its professional business.
It has upgraded its outlook from April but remains cautious. “Underlying revenue performance” (pre-COVID-19) has been ahead of early expectations for 2020. It expects tailwinds from COVID-19 to drive high single-digit growth for the year, with “underlying” growth of 3-4%.[Image Credit: © RB]
LVMH Moët Hennessy Louis Vuitton released results for the first half of fiscal 2020.
Organic revenue down 28% in H1, and down 38% in Q2, but there were encouraging signs in June in some parts of the business. Sales in the US and Europe were weak in Q2, but Asia, and especially China, saw marked improvement.
In the categories, H1 organic sales growth was -23% for Wines & Spirits, -24% for Fashion & Leather Goods, -29% for Perfumes & Cosmetics, -39% for Watches & Jewelry, and -33% for Selective Retailing.
In Q2, organic growth declines were particularly sharp for Watches & Jewelry (-52%) and Perfumes & Cosmetics (-40%), but all business units posted declines of 33% or more.
H1 operating margin was 9%.
LVMH provided no quantitative outlook for 2020 as a whole.[Image Credit: © LVMH]
Unilever released its Q2 2020 results for the period to June 30, 2020 aliong with a presentation.
Underlying sales growth of -0.3% in the quarter (volume -0.8% and price +0.5%), well ahead of the analyst consensus of -4.3%.
In the categories:
USG for the half year was -0.1%, with Home Care +3.2%, Beauty & Personal Care -0.3% and Foods & Refreshment -1.7%).
China saw some recovery after April, but in most major markets Covid-19 effects were strongest from March, although consumption patterns normalised during Q2.
Latin America was impacted later than other major markets, with the effects primarily in Q2.
Channel closures negatively impacted food service, out of home ice cream and the Prestige businesses, but home consumption of foods, ice cream and tea grew. Consumers had fewer personal care occasions, negatively impacting the personal care business, except for hygiene products, but increased home hygiene activity increased demand for hand and home hygiene products.
For the first half of the year, gross margin was +30bps and underlying operating margin +50bps (to 19.8%).
Brand and marketing investment -100bps in the half year, but it expects higher spend in the second half.
The earnings release made no mention of full-year outlook, which was withdrawn in the previous quarter.[Image Credit: © Unilever plc]
The Coca-Cola Company – Organic Revenues -26% Worldwide As Away-From-Home Channels Feel The Pressure
July 21, 2020
The Coca-Cola Company reported its Q2 2020 results for the period to June 26, 2020.
Organic revenues declined 26%, including 22% decline in concentrate sales and a 4% decline in price/mix, primarily driven by a drop in sales in away-from-home channels (about half of the company’s revenues).
Comparable operating margin (non-GAAP) was 30.0%, down 30pts, from top-line pressure and currency headwinds, partially offset by cost management measures.
In the individual units:
Coca-Cola expects Q2 to be the most affected quarter of the year, but uncertainty prevails and the overall impact on 2020 results remains unclear and the “full year financial and operating results cannot be reasonably estimated at this time”.[Image Credit: © Coca-Cola]
Johnson & Johnson – Medical Devices The Main Drag On Performance, But Consumer Health Sales Down Too
July 16, 2020
Johnson & Johnson published its Q2 2020 results and released a presentation.
Operational sales (excluding currency translation) were -9.0%, and -8.8% when also adjusted for M&A effects:
Gross margin was 64.1%, -210bps.
Margin on adjusted earnings before provision for income taxes and net earnings was 29.1%, down 12.8 points, with all the impact felt in Medical Devices. Consumer Health and Pharmaceuticals margins were up on the year-ago period.
Full year 2020 guidance includes adjusted operational sales growth of (0.8%) – 1.0%, an improvement on the April 2020 guidance of (3.0%) - 0.5%.[Image Credit: © Johnson & Johnson]
PepsiCo released its results for the 12-week period to June 13, 2020 and released prepared remarks.
In Q2, organic sales growth was -0.3% (volume -2%):
Reported operating margin was -205bps to 14.5% and core operating margin -195bps to 15.8%.
The press release contained very little commentary on the results.
In the company’s prepared remarks for the earnings call, CEO Ramon Laguarta said the global snacks business saw 5% organic growth in the quarter, while global beverages declined 7% as higher take-home consumption was more than offset by lower sales in the convenience and gas and away-from-home channels.
Operating margin decline was driven by $400 million of incremental COVID-19 related costs. The margin would have improved had these costs not been incurred.
March and April were particularly challenging, but there was improvement in May and June.
In North America, the beverage business was challenged but the snacks business grew well. Many categories in Quaker Foods benefited from increased breakfast occasions, in-home dinners and home-baking.
The international businesses were significantly affected by the timing of COVID-19 measures in each market, but snacks and foods were more resilient than beverages.
Looking ahead, the company sees uneven recovery in international markets from varying responses by market to address the pandemic; greater volatility in travel and tourism; and changes in disposable income and affordability.
CFO Hugh Johnston said that PepsiCo expects some costs related to COVID-19 to persist. To mitigate this it is managing discretionary expenses, reducing non‐essential advertising and marketing spend, and prioritized high‐velocity SKUs.
It expects organic revenue to increase at low-single digit pace in Q3 but has stated that its previous financial outlook for fiscal year 2020 is no longer applicable.[Image Credit: © PepsiCo]
Walgreen’s Boots Alliance – Comparable Sales Up In Retail Pharmacy USA But Down Sharply At Boots UK
July 09, 2020
Walgreens Boots Alliance reported its Q3 2020 results for the period to May 31, 2020
Sales + 1.2% on a constant currency basis:
Gross margin -290bps to 18.6% (-280bps to 18.9% on an adjusted basis).
Operating margin -880bps to -5.3% (-230bps to 2.3% adjusted).
The company expects continued adverse conditions from COVID-19 in Q4, especially in the UK.[Image Credit: © Walgreens Boots Alliance]
Associated British Foods – 40% Constant Currency Decline, Driven By Retail, But Grocery +9%
July 02, 2020
ABF issued a trading update for the 40 weeks to June 20, 2020.
For the latest quarter, Group revenue from continuing operations -39% at constant currency:
In the quarter, Grocery benefited from increased retail channel sales, partially offset by weaker foodservice demand. In Retail, ABF’s Primark stores were closed for most of the quarter. Nearly all the stores are now open again.
Operating profit for Grocery, Agriculture and Ingredients were strongly up in the quarter.[Image Credit: © Associated British Foods ]
Constellation Brands – Organic Sales Down 4%, Margins Up
July 01, 2020
Constellation Brands published its Q1 2021 results for the period to May 31, 2020.
Organic net sales -4%
Gross margin +120bps to 50.3% (+60bps to 52.6% on a comparable non-GAAP basis).
Operating margin +140bps to 31.1% (+190bps to 35.2% non-GAAP). Beer operating margin +240bps to 41.7%. Wine & Spirits margin +240bps to 28.3%.
The company has not made available guidance for Fiscal 2021 due to continued uncertainty and the potential impact of COVID-19 on the business.[Image Credit: © Constellation Brands ]
General Mills – Huge Growth In North America Retail And Pet Part Offset By Convenience and Foodservice Channels
July 01, 2020
General Mills published its Q4 2020 and full year 2020 results (along with a presentation) for the period ending May 31, 2020.
Q4 net sales + 21%, with organic sales +16%, driven primarily by pandemic-related food demand.
Adjusted operating margin +40bps to 17.7%.
Diluted EPS +9% and adjusted diluted EPS +33% at constant currency.
The impact of elevated at-home eating was particularly strong in North America Retail segment and less pronounced in the Europe & Australia segment, reflecting its lower proportion of net sales in those categories. Pet saw increased demand early in the quarter from consumer stocking, but this unwound a little towards the end of the quarter. Reduced away-from-home food demand resulted in lower growth for Convenience Stores & Foodservice and Asia & Latin America segments.
General Mills production and distribution facilities have operated with little disruption during the pandemic, but the company is not providing an outlook for fiscal 2021 yet. It sees the balance of at-home and away-from-home consumer food demand as the main uncertainty as consumers decide how to act as the economy reopens.[Image Credit: © General Mills]
Tesco PLC – LFL Sales +7.9%, UK Online Sales +90% In May
June 26, 2020
Tesco released a trading update for Q1 2021 for the 13 weeks to May 30, 2020.
Like-for-like sales +7.9%, with UK & ROI +8.2%.
Online sales were +48.5% in UK (including +90% in May) and +50.9% in ROI. Central Europe +106.3%. The online grocery business now contributes over 16% of total UK sales.
Sales in the convenience business +9.5. Sales in large stores were +5.4%.
UK food sales +12%.
COVID-19 response has resulted in a substantial increase in costs, especially in the UK, mostly on payroll (such as 12 weeks of paid leave to 26,000 “vulnerable colleagues” and recruiting 47,000 temporary staff). It has also had to re-open mothballed distribution centres and property. It estimates that an incremental cost for the UK for the full year of some £840 million.
It acknowledges the uncertainty of the current situation but expects Retail operating profit for the year to be close to 2019/20 on a continuing operations basis.[Image Credit: © Tesco plc]
McCormick released results for Q2 2020 and half-year to May 31, 2020, along with a presentation.
Constant currency sales were +9.6% in the quarter (volume/mix +7.4%, price 2.2%), with strong growth in the consumer segment, driven by at-home cooking demand, but a decline in the flavor solutions segment as sales to foodservice customers plummeted.
Adjusted operating margin +210bps. Consumer segment operating margin, excluding special charges, was +600bps, but Flavor Solution -780bps.
Adjusted EPS +27%.
McCormick withdrew its fiscal 2020 guidance on March 31, 2020 and has chosen not to provide new fiscal 2020 guidance, with uncertainty prevailing over the balance between at-home and away-from-home food demand, and the possible resurgence of COVID-19.
For the first half of the year, constant currency sales were +4.3% (Consumer +11.3% and Flavor Solutions -6.0%).[Image Credit: © McCormick & Company]
Large PepsiCo franchisee Varun Beverages (Haryana, India) reported weak volume growth during the January-March quarter, thanks to the coronavirus pandemic lockdown. The company's organic volumes were hit in the last 10 days of March due to the spread of COVID-19 and the subsequent lockdown, the company said. Lower volumes dragged core performance as profit before tax for the quarter fell 87.5 percent from the same period last year. The company said it sold its entire inventory of finished goods and also resumed functions at some of its production facilities in April with the relaxation of the lockdown. Its international and institutional business were also expected to take a hit due to the pandemic.[Image Credit: © RJCORP]
The loss of sales – between $14.8 million and $22.2 million a month – from the pandemic-related closings of bars, pubs, and restaurants in the U.K. will not be offset by recent increases in supermarket sales, according to Robinsons and J2O maker Britvic. Investors, meanwhile, wonder whether they will be paying for the extra costs, with suspension of a planned interim dividend. Analysts at Jefferies said a postponement had “potential” but said the company had enough cash to endure the crisis. JP Morgan analysts expect a dividend suspension but see a boost in sales from pre-lockdown stockpiling and strong supermarket sales. Britvic lost a major sponsorship marketing opportunity when the Wimbledon tennis championship was canceled in April due to the pandemic.[Image Credit: © Britvic PLC]
Walmart published its Q1 2021 results for the three months to April 30, 2020 and released a presentation. A transcript of its earnings call is available here.
Revenue +9.7% at constant currency: US comp sales +10.0% and US eCommerce sales +74%; Walmart International +7.8% at constant currency; and Sam’s Club comp sales +12.0% (excluding fuel) and eCommerce +40%.
Net sales significantly positively affected by COVID-19 with “unprecedented demand for products across multiple categories.”
US sales growth driven by food, consumables, health & wellness and some general merchandise categories. Comp sales +3.8% in February, but surged from mid-March. March comp sales +15.4%. Store sales slowed during the first half of April before recovering as customers spent government stimulus money. April comp sales +9.5%.
International comp sales positive in nine of the 10 markets, including Mexico, China, Canada and the UK. China comp sales +11.7%.
Uncertainty surrounding the COVID-19 impact led to Walmart withdrawing its financial guidance for fiscal year 2021. Specific uncertainties highlighted include the length and intensity of the crisis and lockdowns, economic stimulus measures, consumer confidence and employment.[Image Credit: © Walmart]
CPGs Largely Benefiting From COVID-19
May 13, 2020
Analysis of Q1 sales data shows many CPGs gaining from coronavirus. Points to more pronounced Q2 impactConsumer goods stock indices are down about 10-15% this year, showing the market thinks these companies are generally worth less. Recently released Q1 sales data from public MNCs give the first broadly consistent view into the impact of COVID-19 thus far, and allows us to build a sense of what may come in Q2.
We analyzed results from around 25 MNCs covering core CPG categories: Food and Beverages, Beauty and Personal Care, Pet Care and Home Care. [Method detailed below.]
Far from being an unmitigated disaster, the pandemic caused a sales boost for most CPG categories.
Sales weighted averages of the underlying growth differentials between Q2 2020 and the year-ago quarter show that most CPG categories' sales rose, with very strong increases for Health and Pet care categories.
Beauty & Personal Care is an exception. It fell an average of just over 7 percentage points in reported results.
These are broad, aggregate impacts. Conditions varied greatly within categories and across companies. Shifts of 20-30% are common but there were much larger changes too. For example, Danone saw grocery sales rise up to 70% for some weeks.
Home Care was positive, with Cleaning the clear winner. Sales for Clorox’s Cleaning segment were up 32% on a reported basis – and with foreign exchange translation and M&A insignificant for the segment, this will be close to an underlying rate too. But, there were negative factors for the category, with Unilever’s Home Care segment seeing lower underlying growth in the recent quarter than the strong +6.0% rate in Q1 2019.
Health was also a notable gainer: RB saw like-for-like sales up over 37% for its Health products in North America.
One big winner is e-commerce. CPGs and retailers report very robust increases. Beiersdorf’s e-commerce sales were +23% in the quarter, Revlon’s were up 47%.
At the corporate level, some companies were largely unaffected while others had ideal portfolios. P&G’s 6.0% organic growth rate was a point ahead of Q1 2019’s while RB’s portfolio proved a perfect fit for shifts in demand, delivering over 13% of like-for-like growth.
Declines in Beauty were especially steep. Coty’s organic sales fell 34.8% in Asia Pacific while Estée Lauder Make Up sales were down 20%. Travel retail was amongst the hardest hit. Brands selling in this channel saw severe declines. Beiersdorf’s La Prairie, for example, fell 35.8%.
Some companies looked to have suffered specific problems. We estimate, for example, that McCormick saw its entire China sales go to zero from the day of the Wuhan lockdown for the month of February, the last month of its quarter (contact us for analysis).
Gauging the full impact
Of course, these findings greatly underestimate the overall impact of the pandemic. We analyzed results for companies whose quarters closed as early as Feb 23 and as late as March 31 and so the impacts occurred over only part of the period – perhaps two-thirds in China and other parts of Asia, a third in Europe and North America, and an even shorter period in other regions.
Overall, we estimate around 30-40% of the quarter was effectively under COVID-19 conditions.
Had pandemic conditions prevailed for the entire quarter, we estimate a nearly 3x impact. Pet Care would be up about 30 percentage points, Health about 20 and Beauty & Personal Care down over 20 points.
Sales at risk, or gained
Applying these full-quarter estimates to broad global category size estimates shows the broader market impact. This suggests a total loss for Beauty & Personal Care of $25 billion, but a total gain for Food & Beverages of 50 billion. For some context, L’Oréal’s total quarterly sales (all Beauty) are just over $8 billion, while Nestlé’s (mostly Food and Beverages) are about $24 billion.
What’s in store for Q2?
Forecasting is a fool’s game, so naturally, we’ve given it a go. All up, we expect Q2 will be closer to our ‘full quarter impact’ assessment. Q2 will cover that period in which the pandemic was most pervasive with longer durations of lockdowns. It will also partly capture the easings and reopenings we are seeing as economies struggle to find momentum within the ‘new normal’.
Some companies will continue to benefit where shopping behaviours have permanently changed – greater spend on cleaning products, wipes, some dry foods… – while some will suffer as consumers destock or shift from certain channels. CPGs are unlikely to see the struggle for relevance faced by harder hit businesses such as mass travel and live entertainment. But all CPG companies face a massive task of reassessing the market and competitive landscape to see merging opportunities fast and expand into them. We are actively engaged in this process and will return to this topic.
What will happen to margins?
Q2 results will start to be released in mid-July and we will track and analyze them as they appear. We also plan to use the more detailed H1 results to conduct margin analysis. While many CPGs are seeing rising sales, we expect margins to fall, in some cases dramatically. In its earnings call, Danone pointed to “reduced supply chain efficiency from distancing requirements, lower productivity, higher transportation costs and other constraints.”
Capturing these impacts will help us build a view of CPG profitability post-pandemic. Contact us if you want to receive this analysis or get a deeper dive into your categories.
We compared underlying sales growth in Q1 2020 with the corresponding growth rate in the year-ago quarter, adjusted for the duration of the COVID-19 impact on supply and demand.
For multiple-category companies, we looked as far as possible at the individual segments (e.g. Unilever Home Care and P&G Health Care). For others that have a focus on one category (e.g. L’Oréal) we looked at company-level numbers. Overall, we captured data points from around 45 businesses (segments or companies).
We focused on underlying sales growth since this best reflects underlying business performance. Companies variously report this, with some differences in definition, such as organic, like-for-like and underlying.
There are several complications:
Shiseido announced its Q1 2020 results for the period ended March 31, 2020 and released a presentation.
Like-for-like growth (excluding the impact of the application of US accounting standard ASC 606 and the acquisition of the US skincare brand Drunk Elephant, etc.) -16.4% worldwide: Japan -21.0% and Americas -21.7%.
FX-neutral sales -15.8% worldwide: Japan -21.2%, China -12.0%, Asia-Pacific -19.2%, Americas -14.6%, EMEA -14.9%, Travel Retail -1.6% and Professional -17.2%.
In Japan, the spread of COVID-19 meant people stayed at home and there were shortened operating hours or temporary closures of retail stores, affecting sales mainly of prestige and cosmetics brands. A sharp drop in foreign tourist numbers to Japan also affected sales.
The China Business was impacted from the second half of January, but retail stores are mostly open again now. In Asia Pacific, COVID-19 hit sales particularly in Southeast Asia.
In the Americas, performance was affected from March onwards. In EMEA, sales slowed sharply in March, especially in the UK, Spain and Italy.
In Travel Retail Business, consumer purchases dropped sharply from February onward, particularly in Japan and Asia.
In the Professional business, COVID-19 led to stay-at-home policies and the closure of hair salons.[Image Credit: © Shiseido ]
UK supermarket chain Morrison’s published its Q1 2020 sales update for the 14-week period to May 10, 2020.
Trading was volatile: stocking up, followed by the initial impact of lockdown and weak Easter trading, and then subsequent improvement.
Group like-for-like sales (excluding fuel) +5.7%: retail +5.1% and wholesale +0.6%.
Including fuel, group LFL sales -3.9% (fuel LFL -39.3%, and -70% since lockdown).
Lockdown started in week eight: retail contribution to LFL was negative for weeks 8-11.
Morrison’s said it has gradually returned to normal trading hours in recent weeks. Retail contribution to LFL +9.6% in weeks 12–14.
It says it continues to monitor 2020/21 scenarios but has “minimal certainty or visibility around a precise outcome”. [Image Credit: © Morrisons]
Revlon released its Q3 2020 results for the period ended March 31, 2020.
Reported net sales -18.1%, including approximately $54 million of negative impacts associated with COVID-19. Constant currency sales -16.5%.
Excluding COVID-19 impacts, constant currency sales -6.5%.
Revlon says it has already seen signs of strong sales activity in China and other markets.
The Revlon Segment was -25.1% excluding foreign exchange translation effects. Elizabeth Arden segment -12.3%. The Portfolio segment -4.4%. Fragrances -13.5%.
North America -16.1% constant currency and International -16.9%.[Image Credit: © Revlon]
Coty released its Q3 2020 results for the period ended March 31, 2020. It also announced a strategic partnership with KKR to provide initial investment of $750 million by selling convertible preferred shares to KKR and the signing of a Memorandum of Understanding to sell a majority in Coty’s Professional Beauty and Retail Hair Businesses (including the Wella, Clairol, OPI and ghd brands, collectively called “Wella”), which will be a standalone company, 60% owned by KKR and 40% by Coty.
In the quarter, organic like-for-like sales were -19.5%, driven by declines in Asia Pacific (-34.8%), EMEA (-20.1%), Americas (-18.8%) and Professional Beauty (-11.9%).
In Asia Pacific, weakness began at the start of the quarter (in China and Asia Travel Retail). Deterioration began elsewhere during March. LFL, sales were -30% in March.
In The Americas, sales of prestige brands were -30% in March and down mid-teens for mass brands.
In EMEA, sales were impacted by lockdowns in February in Italy, followed by most of Europe and the Middle East in March.
Since the lifting of lockdowns in China, Coty has seen some improvement during April.
Professional Beauty was impacted by salon closures during March, but e-commerce sales grew in the double digits.
Luxury LFL growth was -26.3%, impacted by China and Travel Retail initially, and then the closure of department stores, perfumeries and specialty retailers. Consumer Beauty -28.3% LFL.[Image Credit: © Coty]
Henkel – Laundry & Home Care Strongly Positive, Partially Offsetting Weakness In Other Categories
May 11, 2020
Henkel published its Q1 2020 sales results for the three months to March 31, 2020.
Group organic sales -0.9% (volume +0.1%): Beauty -3.9% (-2.9%), Laundry & Home Care +5.5% (+7.8%) and Adhesive Technologies -4.1% (all volume).
Emerging markets +2.2% organic growth and mature markets -2.8%. Western Europe -4.6%, Eastern Europe +10.8%, Africa/Middle East +6.8%, North America -1.4%, Latin America -2.0% and Asia-Pacific -5.7%.
In Beauty, the branded consumer goods business posted flat organic growth, but the Hair Salon business was strongly negative. Emerging markets were slightly negative, although Eastern Europe saw strong growth. In the mature markets, Western Europe and North America regions were both down.
In Laundry & Home Care, strong organic growth came predominantly from the Persil brand (up double-digits) in Laundry and double-digit growth in Home Care. The emerging markets were the main drivers regionally, although mature markets were positive.
Henkel confirmed an April 7 decision that “a reliable and realistic evaluation of the future business performance of Henkel is currently not possible”.[Image Credit: © Henkel]
Suntory Beverage & Food – Positive Currency-Neutral Growth In Americas and Oceania, Negative Elsewhere and Overall
May 08, 2020
Suntory Beverage & Food Limited published its financial results for Q1 2020, ending March 31, 2020, also providing some supplementary information and a presentation.
Currency-neutral sales were -1.7% worldwide and -2.6% in Japan, -2.1% in Europe, -2.4% in Asia, +5.0% in Oceania, and +5.0% in Americas.
In Europe, France and Belgium -3.5% currency neutral, UK and Ireland +1.8%, and Spain and Portugal -11.8%.[Image Credit: © Suntory Holdings Limited]
Herbalife Nutrition released Q1 2020 financial results for the period ended March 31, 2020.
Currency-neutral sales were +10.4% (excluding Venezuela): +8.3% for North America, +6.0% EMEA, +13.3% Asia Pacific and +30.6% for China.
Volume +5.6% worldwide, including +7.7% for North America, +3.4% EMEA, -5.3% South and Central America, -6.7% Mexico, +11.0% Asia Pacific and +29.4% in China.
This was the company’s largest ever quarterly volume point performance, and March was its largest single month.
Herbalife also provided preliminary volumes for April: -0.7% worldwide, with North America +14.8%, EMEA +3.5%, Asia Pacific -13.8% and China +19.5%.
The company provided no outlook but said it will decide periodically if it’s able to provide guidance for full-year 2020.[Image Credit: © Herbalife]
Edgewell Personal Care Company announced its Q2 2020 ending March 31, 2020.
+2.4% organic net sales growth, driven by COVID-19 related increases in Feminine Care and Wet Ones products.
Excluding COVID-19 related impacts, organic net sales growth was flat.
AB InBev released a financial summary of its Q1 2020 performance for the three months ended March 31, 2020.
The impact of COVID-19 increased significantly toward the end of the quarter.
Q1 2020 organic revenue -5.8% (total volume -9.3%, -3.6% excluding China, and revenue per hectoliter +3.9%).
In the regions, organic revenue growth was +2.1% (volume -0.7%), Middle America -3.5% (-2.6%), South America -1.6% (-5.5%), EMEA -1.6% (-0.1%), and Asia Pacific -38.8% (-42.3%).
April 2020 global volumes were down some 32% on closure of the on-premise channel in most markets. China volumes were -17%, an improvement on the -46.5% in Q1.
Combined revenues of its three global brands (Budweiser, Stella Artois and Corona) -11.0% globally and -17.5% outside respective home markets.
The company expects the impact on Q2 2020 results to be materially worse than in Q1, but it has withdrawn its outlook for full-year 2020.[Image Credit: © AB-InBev]
Natura &Co announced Q1 2020 results for the period ending March 31, 2020.
Constant currency growth -6.2%: Natura &Co Latam -1.3% (Natura +12.4%, Avon -11.9%), Avon International -15.0%, The Body Shop -10.5% and Aesop (a luxury skin, hair, body and home care brand) +10.5%.
Latin America and Avon International saw COVID-19 impacts late in the quarter. The Body Shop was impacted by lockdowns in February and March after solid growth in January with 300% growth online in the last few weeks of the quarter.
Natura &Co posted revenue growth in the first quarter of 2020, with a very strong digital ramp-up in the past several weeks as the company adapted to the global impacts of the Covid-19 pandemic.
Roberto Marques, CEO, said: "We entered 2020 with excitement and a solid plan around the integration of Avon into Natura &Co. We had no idea that so quickly our focus and resolve would be tested by a global pandemic as never before seen”.
He said the company moved rapidly to increase production of essential items and increased training and capabilities with digital selling tools.[Image Credit: © Natura]
Beiersdorf released a summary of its Q1 2020 sales performance for the three months ended March 31, 2020 along with a presentation.
Organic sales -3.6%: Consumer Business Segment -3.3% and tesa -5.1%.
In the Consumer business, NIVEA sales were -0.6%, the Derma business unit (including EUCERIN and AQUAPHOR) brands +11.5%, the Healthcare business unit +10.1%, but LA PRAIRIE, hit by international travel, was -35.8%.
Organic sales were -6.8% in Europe (-9.6% in Western Europe and +5.4% in Eastern Europe); +10.6% in the Americas (North America +1.3% and +18.9% in Latin America); and Africa/Asia/Australia -5.0% (China, India and Japan all declined).
E-commerce sales were +23% in the quarter.
The presentation concluded with a number of “insights” for 2020, including: a major shift in consumer and shopping behaviour, the need to mitigate the impact through cost initiatives, and the lack of visibility “beyond a difficult Q2”.
Given uncertainty surrounding the remainder of 2020, the company has withdrawn guidance it issued in early March.[Image Credit: © Beiersdorf]
Estée Lauder Companies – Double-Digit Sales Decline, Americas -23% At Constant Currency
May 01, 2020
Estée Lauder Companies published Q3 2020 results for the three months to March 31, 2020.
Constant currency sales growth -9% (non-GAAP at constant currency -10%), driven by retail store closures.
Constant currency sales growth was flat for Skin Care, -20% for Makeup, -10% for Fragrance, and -12% for Hair Care.
In the regions, constant currency growth was -23% in The Americas, -5% in Europe, the Middle East & Africa, and -1% in Asia/Pacific.
Although momentum from H1 2020 carried over into January, the picture changed as COVID-19 spread beyond Asia. In Asia/Pacific, some stores in northern Asia have reopened but most stores in southern Asia remain closed, as are stores in Europe, the Middle East & Africa and in The Americas. Also, air travel conditions have affected the travel retail business.
In China, at the peak in February, over 70% of retail stores (company- and customer-operated) were closed, and the remaining stores were operating on reduced hours. During that period, online net sales growth accelerated “as beauty advisors and retailers worked to capture consumer demand online”.
Net sales in mainland China returned to double-digit growth in constant currency in March, mainly driven by online, and overall net sales were up for the quarter as a whole. Net sales in Korea returned to growth since the start of April.
The company has decided not to provide specific sales guidance for Q4 and full-year 2020, but expects to “continue to build global share, even in a declining market”. It also expects most retail stores will remain closed during the April-June quarter and that “traffic will rebuild gradually when stores reopen”.[Image Credit: © EL Companies]
Clorox announced Q3 2020 results for the period to March 31, 2020.
Organic sales growth +17%, driven by 18 points of organic volume growth from higher demand for products in response to the pandemic:
Household sales were driven by Cat Litter and Grilling. Lifestyle growth was led by Water Filtration, as well as Food and Natural Personal Care, partially offset by a decline in Dietary Supplements from a supply disruption related to COVID-19. International sales growth came from every geographic region.
The company updated its Fiscal 2020 outlook for organic sales growth to 6-8%.[Image Credit: © The Clorox Company]
Colgate-Palmolive released its financial results for Q1 2020, ending March 31, 2020.
Organic sales +7.5% (organic volume +5.5%, pricing +2.0%):
North America: Organic sales +8.0% (organic volume +8.0%, pricing flat)
Amazon announced financial results for Q1 2020 ended March 31, 2020 and also released a presentation.
Net sales +26%, and +27% excluding currency impacts.
Net sales growth excluding foreign exchange movements was +29% in North America, +20% in the International segment, and +33% in the AWS business.
Online stores were +25%, physical stores +8%, third-party seller services +31% and subscription services +29%.
The company’s full-year 2020 guidance reflects its current estimates relating to COVID-19 impacts, and is “highly dependent on numerous factors that we may not be able to predict or control”, and also assumes the effect on consumer demand and spending behaviour will reflect the experience so far in Q2. It expects net sales growth of 18-28% versus Q2 2019, including a -70bp foreign exchange impact.[Image Credit: © Amazon]
Kellogg Company released its financial results for Q1 2020, ended March 28, 2020, along with a presentation.
Organic growth +8% (volume +8.4%, pricing/mix -0.4%), with slightly more than half attributed to higher consumer purchases resulting from the COVID-19 pandemic.
Kellogg affirmed full-year 2020 guidance of +1-2% organic sales growth, excluding “significant supply chain or other market disruptions related to the pandemic or global economy”.[Image Credit: © Kellog's]
Kraft Heinz reported Q1 2020 results for the period to March 28, 2020.
Organic net sales +6.2% on 6-7pp of increased consumer demand related to COVID-19. Pricing +1.6% and volume/mix +4.6%. Growth in at-home consumption more than offset unfavorable effects from retail inventory reductions and reduced foodservice shipments.
US boosted by 6-7 pp of higher consumer demand related to COVID-19 in March. Organic sales +6.4% (pricing +2.4% and volume/mix +4.0%).
Church & Dwight announced its financial results for Q1 2020, ended March 31, 2020.
Organic sales +9.2% (versus its outlook of about 3.0%), with volume +6.9% and price/mix +2.3%.
Sales growth was affected by pantry loading in March, during which there was a 30% increase in domestic consumption across many of its brands.
Retailer orders and shipments are high in April too as inventories and store shelves are restocked, and consumption is slightly positive despite domestic pantry de-loading.
Of its 15 domestic categories, 10 grew consumption in Q1 and seven this quarter saw double digit growth.
Even after a strong Q1, the company has withdrawn its full-year 2020 outlook, but it expects US April sales to be +8% versus last year, followed by a shipment slowdown in the rest of Q2.[Image Credit: © Church & Dwight]
Sainsbury’s issued preliminary results for the 52 weeks to March 7, 2020, including the very recent trading performance.
It has seen strong grocery demand since the start of March, with particularly high demand in week 52 of its 2019/20 financial year and the first two weeks (to March 21) of the current year.
In the nine weeks to March 7, total retail sales (excluding fuel) were +1.3%, with Grocery +2.0%. In weeks 51 and 52 (ending February 29 and March 7, respectively), Grocery sales were +3% and +12%, respectively.
In the week ending March 14, Grocery sales were +29%, rising to +48% in the following week, before some rebalancing and more moderate growth in the following five weeks to April 25 (which included some seasonal timing effects, such as Mother’s Day and Easter).
The company points to uncertainty over COVID-19 and how that will impact the business and consumer behaviour, and the economy as a whole. Its base case scenario assumes lockdown restrictions will ease gradually by the end of Q1 of its financial year (end June), but business disruptions will persist until mid-September, after which consumer demand (and particularly for general merchandise and clothing) will be affected by weaker economic conditions. It expects high single-digit grocery sales growth through the lockdown period followed by low single-digit growth over the remainder of its H1 and a return to normal grocery market conditions in H2.[Image Credit: © Sainsbury's]
RB published its sales performance for Q1 2020, ended March 31, 2020.
Like-for-like growth +13.3%:
E-commerce up over 50%, with March particularly strong.
2020 outlook now better than originally thought (outlook in Q4 2019 was to improve on 2019 LFL growth of 0.8%), but the balance of 2020 remains uncertain.
The CEO said that RB has seen “strong consumer demand, particularly in March and April but the split between defensive buying and higher levels of underlying consumption is unclear”. Demand for products like Dettol and Lysol may be sustained, but pantry loading of others items will probably unwind.[Image Credit: © RB]
Mondelēz International – Benefited From March Jump In Snacks, Especially North America
April 28, 2020
Mondelēz International released its results for Q1 2020, ended March 31, 2020, along with a presentation.
Organic net revenue +6.4% (volume/mix +4.6%, pricing +1.8%), including a significant jump in consumer demand in March for snacks in developed markets, particularly in North America.
Carrefour published its Q1 2020 results to March 31, 2020.
Like-for-like growth +7.8%, driven by solid sales in January and February (+4.3% LFL) and “precautionary purchases” in March related to COVID-19.
In the geographies, France +4.3% LFL, Europe +6.1% (Spain +6.6%, Italy +2.5%, Belgium +6.2%, Poland +8.8%), Latin America +17.1% (Brazil +7.6%, Argentina +70%) and Taiwan +6.0%.
Food +9.9%, non-food -3.5%. Food e-commerce sales +45%. Organic food products +30%.
Similar consumption patterns in different markets as governments locked down, ahead of which consumers were making precautionary purchases, mainly in dry groceries and long-shelf-life items. Traffic and average basket hit new records.
After lockdowns, consumers preferred local outlets rather than hypermarkets. The number of store visits fell but average basket grew significantly. Hypermarkets +0.9%, benefiting from precautionary purchases in March. Supermarkets +8.1%, benefiting from “intermediate positioning, combining proximity and broad choice”. Convenience formats +11.0%.[Image Credit: © Carrefour ]
PepsiCo – 8% Organic Growth, Including +2% COVID-19 Impact
April 27, 2020
PepsiCo published Q1 2020 results for the 12 weeks to March 21, 2020, along with a presentation.
The press release provided little commentary, buit it did provide numbers that have various rounding issues.
Organic sales growth +7.9% (volume +6%, effective net pricing +2%):
The impact of COVID-19 on organic sales growth was +2% (from the GAAP/Non-GAAP Reconciliation).
PepsiCo said that COVID-19 rendered its previous financial outlook for 2020 no longer applicable.[Image Credit: © PepsiCo]
Keurig Dr Pepper released its results for Q1 2020 for the quarter to March 31, 2020.
Constant currency net sales +4.5% (volume/mix +5.0% and price -0.5%):
Updated for Q1 2020 earnings call (transcript from Nexis).
CEO Alan Jope, said Unilever has closed some factories, but only for a few days, and it was now running at 85% normal output at its 221 sites, with production focused on high-demand products, such as in hygiene and home cooking categories. For example, it has switched over 30 lines to producing hand sanitizer, prioritizing frontline health care.
The company has observed changes to consumer behaviour – buying more hand and surface hygiene products, a change it expects will last beyond the crisis, and household stocking of food and hygiene items, which is more of a short-term effect.
Out-of-home food channels have effectively closed, impacting ice cream and its Food Solutions business, but e-commerce grocery sales have “rocketed” – doubling in the U.S. in Q1, and up 36% for the company as a whole.
Unilever has also seen renewed consumer focus on familiar brands and high-quality products, but expects some trading down as the economic downturn bites.
The company has replanned its innovation, postponing some and accelerating others, to adjust to the channel shift.
Four factors (decline in global Food Solutions; decline in out-of-home ice cream; significant slowdown in the Chinese market; and total lockdown in India at the end of March) each had a roughly -1% impact on Group sales, partially offset by household stocking, mainly in developed markets. Pantry loading in the U.S added around 2% to sales.
Out-of-home ice cream sales (~€3 billion annually and down nearly 70% in Q2 and Q3) typically down 50% or more when a market is in lockdown.
Food service business (€2.5 billion) typically down around two-thirds when lockdown impacts food service channels.
In Q1, Africa and parts of Latin America were just starting to be impacted. India had a nationwide shutdown at the end of March.
In China, restrictions were being eased at the end of March and the company says it’s starting to see significant recovery and “in fact, we've come out of the situation in China competitively advantaged”.
Unilever will focus on the five growth fundamentals it set out at the start of the years as they remain relevant for the short term, but with some slight modification – e.g. “dialing up cash as a focus”.[Image Credit: © Unilever plc]
Kao released a financial summary of its Q1 2020 performance for the three months ended March 31, 2020, but provided no commentary
Like-for-like sales for the Group +0.6%, with Japan -0.2%, Asia +2.5%, Americas +5.3% and Europe -1.9%.
For the Consumer Products business, like-for-like sales +1.3% (Japan +0.6%, Asia +2.9%, Americas +8.0% and Europe -4.5%):
Updated for Q1 2020 earnings call (transcript: via Nexis.com)
Nestlé warned against getting “carried away by the strong organic growth of 4.3%” in Q1 as there were “significant and unprecedented” differences between category, channel and geography.
The majority of markets, especially North America and Europe, posted higher growth on consumer stockpiling, particularly in March for EMENA and later in March for the Americas.
China was impacted for almost the full quarter, but it gradually restored production and logistics to close to normal by the end of the period.
Some categories perceived as essential (culinary products, pet care, coffee and Health Science) saw sales rise significantly. Some were driven by consumer stocking up and more home cooking, but confectionery and ice cream were hit by lower impulse buying and reduced demand for seasonal and gift-giving products (e.g. Chinese New Year products and Easter eggs).
All markets witnessed a significant shift from out-of-home to in-home consumption. Nestlé Professional, out-of-home Water Nespresso boutiques were particularly affected. E-commerce sales were elevated nearly 30%.
Emerging markets grew by 0.5%, but mid-single digits if China is excluded
China posted double-digit negative growth in the quarter. The market is coming back, but there’s still a way to go to climb back to pre-crisis levels.
The company said that some of the initial reactions from China will apply more broadly, such as more interest in value for money. But premium products held up well in the quarter, which is something Nestlé saw in the financial crisis a decade ago. There is also interest in larger pack sizes.[Image Credit: © Nestlé]
Updated for Q1 2020 earnings call (transcript: via Nexis.com).
Danone says it has seen since March “unprecedented swings” in demand from one week, and even one day, to another. Away-from-home and on-the-go consumption dropped sharply, mostly impacting the Waters business (~40% of sales out-of-home versus less than 5% for Essential Dairy and Plant-Based and Specialized Nutrition), and greater demand for at-home food – benefiting Essential Dairy and Plant-Based and Specialized Nutrition in Europe and North America.
Volume growth driven by a strong rise in Essential Dairy and Plant-Based and Specialized Nutrition, boosted by lockdowns in Europe and North America in March. Overall decline in demand for high-value, small-price formats out-of-home for Waters and EDP, moving to larger formats and regular ranges.
Grocery channel up 30-70% in the week following stay-at-home advice, and e-commerce sales were significantly higher than usual.
It has seen a resurgence in demand for big brands, and retailers have refocused their ranges. COVID-19 appears to have highlighted safety and trust as purchase motivations.
Danone expects Q2 will be negatively impacted by destocking for Specialized Nutrition, and Waters will continue to be hit as we reach high season.
Regarding strategy, the CEO said that COVID is accelerating the need for transformation it is already implementing, including the need to focus on:
Nestlé – Strong Organic Momentum On “Essential” Products
April 24, 2020
Nestlé reported Q1 sales to March 31, 2020 and also released a presentation.
Organic growth +4.3% (real internal growth (RIG) +4.7%, pricing -0.4%).
Organic growth regionally:
Products in “essential” categories saw increased demand, including prepared dishes and cooking aids, pet care, coffee and Nestlé Health Science products. Confectionery and ice cream saw sales decline.
A significant shift from out-of-home to in-home consumption, and e-commerce sales +29.4%.[Image Credit: © Nestlé]
Updated for Q1 2020 earnings call
CEO James Quincey said recent developments in China give some clues to how things might look elsewhere over time: encouraging signs of higher consumption as outlets reopen, but full recovery will take time. In China, it’s talking to bottlers about how to regain momentum, such as a pre-summer promotion, but it’s too early to call how markets will recover, even in China.
Immediate actions include supporting retailers, including independents, and adapting to the upsurge in e-commerce with package sizes geared to online sales and reallocating promotions to digital. It’s also looking at ways to support restaurants and how to change marketing, such as reducing direct consumer communication and pulling back marketing spend.
Other cost initiatives include “attacking all discretionary operating expenses”, and pausing capital spend, except what is essential or committed.
Looking forward to the recovery phase, it sees revenue growth management as key, striking a balance of “affordability on recruitment packs in addition to premium offerings”. Coca-Cola will also take account of the “seismic” shifts in consumer behaviour, especially online.[Image Credit: © The Coca-Cola Company]
Pernod Ricard released a sales update for the nine months to March 31, 2020, along with a presentation.
For the latest quarter, the company reported organic growth of -14.5% (Americas -1%, Asia/Rest of World -26%, Europe -8%):
Unilever released a trading update for the quarter ending March 31, 2020 along with a presentation.
Underlying sales growth was flat (volume 0.2%, price -0.2%). Developed markets +2.8%, emerging markets -1.8%. E-commerce expanded.
Outside China, sales patterns were normal until March, when Europe and North America saw household stocking. China slowed significantly since January.
China declined, India was affected by a slower market and the lock-down at the end of March. Latin America +4.9%, South East Asia mixed. North America and Europe benefited from household stocking, but food service and ice cream declined. Latin America had a relatively limited impact from COVID-19.
In the categories:
Heineken N.V. – March Saw Substantial Declines In Volumes
April 22, 2020
Heineken provided a trading update for the quarter ending March 31, 2020.
Organic beer volume -2.1%, with Asia Pacific +4.4% but all other regions negative.
Heineken volume (organic growth) +5.0%. Americas +24.5%, Europe +0.4%, Asia Pacific -5.7% and Africa. Middle East & Eastern Europe -13.6%.
COVID-19 significantly affected March volumes. Beer volume -14.0% in the month, Heineken brand volume -2.4% in the month.
In March, beer volume was -13.8% in Americas, -10.6% in Asia and -15.3% in Europe.
It has crisis management teams in place at a global, regional and local level, to ensure employee health and safety, business continuity and mitigating actions. It has suspended uncommitted CAPEX, except when necessary for business continuity or safety, marketing expense has been reduced, and consumer communication adapted.
Service levels to retailers have increased and B2C initiatives accelerated towards e-commerce.
The company said volumes will worsen in Q2, and the second half of the year also likely to be impacted even as lockdowns are lifted. The company withdrew guidance for 2020.[Image Credit: © The Heineken Company]
The Coca-Cola Company – Purchase Patterns Changed In March
April 21, 2020
Coca-Cola reported sales for the quarter ending March 31, 2020.
Organic revenues flat - concentrate sales and price/mix flat. Unit case volume -1% as growth in North America more than offset by a decline in Asia Pacific.
• EMEA -1% (concentrate sales -1%)
• Latin America +13% (concentrate sales +5%, price/mix +8%)
• North America +4% (concentrate sales +3%)
• Asia Pacific -7% (concentrate sales -3%, price/mix -4%)
Through end-February, volume up 3%, excluding China. Purchase patterns changed in March: substantial declines in away-from-home channels. At-home channels saw early pantry loading in certain markets, before more normalized demand levels, and a sharp increase in e-commerce.
Since the start of April, global volumes down around 25% - nearly all away-from-home.
The company says Q2 impact will be material but remains optimistic about the back half of 2020. It says “full year financial and operating results cannot be reasonably estimated at this time”.
It’s working with bottlers and retail customers to maintain inventory levels in key channels and to prioritize core brands, and is increasing e-commerce investment.[Image Credit: © The Coca-Cola Company]
Danone – China Decline More Than Offset By Pantry Stocking in Europe and North America
April 21, 2020
Danone reported sales for the quarter ending March 31, 2020.
Q1 2020 sales +3.7% like-for-like basis, stronger than it expected: Volume +2.9%, value +0.8%.
Europe and North America both up mid-single digits on a like-for-like basis, led by volumes. Rest of the World sales +2.6% with volumes up slightly - sustained momentum in South East Asia, slight improvement in Russia, but an expected sales decline in China.
Pantry loading and shift to at-home consumption in Europe and North America in March, benefiting Essential Dairy and Plant-Based (EDP) and Specialized Nutrition, but Waters impacted by food service channel closures.
Q2 demand and supply conditions to be “broadly and deeply impacted” by lockdowns, and uncertainty led the company to withdraw full-year financial guidance.
Two specific short-term challenges: significant changes in consumers’ buying behaviours (stocking patterns in the first weeks, shift from out-of-home to at-home, move to larger pack sizes); and maintenance of service levels, with reduced supply chain efficiency from distancing requirements, lower productivity, higher transportation costs and other constraints.[Image Credit: © Danone]
UPDATE: P&G’s Products Fit Well With COVID Concerns
April 17, 2020
Updated for Q3 2020 Earnings Call.
P&G said consumption of hand soaps increased and US consumers are doing more laundry loads per week, washing garments after wearing them just once. Also a jump in demand for Tide Antibacterial Spray, dish care sales have risen with more at-home eating and greater concern about hygiene, which has also spurred sales in surface cleaning, especially disposable cleaning solutions. It also mentioned the February launch of Microban 24, antimicrobial technology to sanitize surfaces for up to 24 hours.
P&G said at CAGNY that Greater China organic sales could be -20% in the quarter. They were -8%, excluding travel retail, with a strong lift from e-commerce. China is now operating at close to full strength and “rebounding nicely”.
Updated for Q1 2020 Earnings Call (transcript from Nexis).
L’Oréal says it has already seen a “pretty quick bounce back” in China for beauty products, and April saw a 5-10% positive trend. It expects “a pretty strong double-digit growth in sales in China” in Q2.
E-commerce grew overall by 53%: 44% for Professional, 45% for Consumer Products, 57% in Luxe, and 62% for Active Cosmetics. China +67%, and over 50% of sales were online.
Jean-Paul Agon, CEO, doesn’t expect “a long and hard demand crisis” after the pandemic. Consumers have been trading up, not because they have a lot of money but because they want better products.
Skincare (35% of sales) was +1% (led by face care). Makeup around -10%. Haircare and hair coloring down mid-single-digits. Fragrances -4%.
Agon said big brands are “favored” in these time – consumers gravitate to what they know, and small players will find it tough – the “Darwinian side of this industry”. L’Oréal has cash and expects to exit the crisis “even stronger. So will there be opportunities for interesting acquisitions? We will see.”[Image Credit: © L'Oréal]
P&G – COVID Boost Gives Strong Organic Sales
April 17, 2020
P&G reported its Q3 2020 results for the quarter ending March 31, 2020.
Organic sales +6% (organic volume +6%) with positive growth in all segments except Grooming:
Organic volume growth came from strong consumer demand in North America and parts of Europe, driven by COVID-19, partially offset by lower volumes in some Asian markets on temporary disruption to retail markets from COVID-19.
In Beauty, Hair Care saw double digit volume decreases in China. Health Care also had reduced volumes in China, as did Baby Care.
P&G’s organic sales outlook for its full year is 4-5%.[Image Credit: © Proctor & Gamble]
L’Oréal – Like-For-Like Sales Fall 4.8%
April 16, 2020
L’Oréal reported results for the quarter ending March 31, 2020.
Like-for-like Group sales -4.8% in a global cosmetics market that fell 8%. Although L’Oréal did not quantify a COVID-19 effect on sales, outcome like-for-like sales growth was down double-digits on recent average like-for-like sales growth levels and -12.5pp on Q1 2019’s level.
L’Oréal Luxe (-8.0%) and Professional Products (-10.1%) most impacted on closure of perfumeries, department stores and salons. Consumer Products -3.5% on continued mass-market retail and Active Cosmetics +11.8% as the pharmacy channel remains open.
All Zones impacted: first China from January, and then the rest of the world, and especially Western Europe (from the start of March) and North America (end of March). However, L’Oréal noted that China is already seeing an encouraging recovery in beauty consumption.
Travel Retail heavily impacted, but e-commerce, now 20% of total sales, grew +52.6%.
Consumer Products Division to focus on three major priorities: maximize e-commerce; adapt communication plans based on digital leadership; and strengthen action plans in categories seeing demand accelerating to ensure product availability. [Image Credit: © L'Oréal]
LVMH – Organic Sales Down 17%
April 16, 2020
LVMH reported results for the quarter ending March 31, 2020.
Sales were -17% on an organic basis with double-digit declines in all segments, with some units seeing retailer destocking:
Looking ahead, LVMH said it can’t yet predict the COVID-19 impact on annual results, but manufacturing closures will have an effect.
LVMH proposed a 30% dividend reduction for approval at the June AGM.[Image Credit: © LVMH]
J&J – Consumer Sales Uptick From OTC Products
April 14, 2020
Johnson & Johnson reported results for the quarter ending March 31, 2020.
Operational sales growth +4.8% (+5.6% on adjusted basis, excluding net acquisition and divestiture effects). Net COVID-19 impact -80bps (from Medical Devices).
Consumer Health +11.3% (11.0% adjusted), Pharmaceuticals +10.1% (+10.2%) and Medical Devices -6.9% (-4.8%).
Consumer Health adjusted operational sales growth was driven primarily by OTC products such as analgesics, upper respiratory products, and digestive health products, but sales across most of the franchises saw a positive impact from COVID-19.
Its outlook for full-year 2020 adjusted operational sales growth is now -3.0% to +0.5%, down from +5.0-6.0% in January 2020.
J&J said it was “leveraging our scientific expertise, operational scale and financial strength in the effort to advance the work on our lead COVID-19 vaccine candidate”. [Image Credit: © Johnson & Johnson]
Tesco - Temporary COVID Uplift That Quickly Normalized
April 08, 2020
Tesco reported preliminary full year results ending February 29, 2020.
Tesco reported significant panic buying in the first few weeks of the crisis, with a 30% uplift in the UK, but sales volumes then normalised.
It increased capacity for online shopping, but admitted it still can’t meet demand.
It incurred additional costs for the retail business related to COVID-19 of £650-925 million for payroll, distribution and store expenses.[Image Credit: © Tesco plc]
Constellation Brands - Little COVID Impact
April 03, 2020
Constellation Brands reported for the quarter ending February 29, 2020.
Organic sales +7% (beer +9%, wine and spirits +4%).
The beer business posted “import beer depletion growth” of 11.4% and “overall depletion growth” of 10.8%, driven by the Modelo and Corona brands (Modelo +18% plus and Corona nearly 5%).
COVID-19 appears to have had little impact on sales in the quarter, but the company has pulled its fiscal 2021 guidance, citing COVID-19 uncertainty.
An April article in Forbes said Corona will cease production as the Mexican government sees it as a non-essential business.
Constellation Brands says it remains “extremely optimistic” about long-term prospects, with 85% of its brands relying on off-premise sales. It also says it has stocks for around 70 days and is confident that Corona Extra’s brand equity is extremely strong.[Image Credit: © Constellation Brands]
Walgreens Boots Alliance - Not Yet Able To Asses Impact
April 02, 2020
Walgreens Boots Alliance reported for the quarter ending February 29, 2020.
Sales +4.1% on a constant currency basis, with COVID-19 starting to impact sales only at the end of the quarter.
The company said that “given the many rapidly changing variables related to the pandemic, at this time WBA is not in a position to accurately forecast the future impacts”.
[Image Credit: © Walgreens Boots Alliance]
McCormick - Apparent Collapse Of Sales In February
March 31, 2020
McCormick & Company reported results for the quarter ending February 29, 2020.
Constant currency sales -1.4% (volume/mix -1.4% and price +1.1%), including a -3% impact on from the impact of COVID-19 in China.
Consumer segment sales -5.7% at constant currency (-6.7% volume/mix and +1.0% price), with Asia/Pacific -27.7% (all volume/mix), driven by disruption in China.
Flavor Solutions constant currency sales +5.7%.
In the Consumer segment, McCormick expects consumer demand growth from pantry stocking and more at-home cooking. In Flavor Solutions, it expects higher demand from packaged food companies but a decline from foodservice customers.
The company withdrew guidance for fiscal 2020.
COVID-19 insight: We lbuilt a model to clarify MCK's China sales in greater detail. We estimate its sales in China fell to close to zero from the date of the Wuhan lockdown (Jan 23). Contact us for details.[Image Credit: © McCormick & Company]
Conagra Brands - Minimal Impact From COVID
March 31, 2020
Conagra Brands reported results for the quarter ended February 23, 2020.
Organic net sales -1.7% (volume -1.3%, price/mix -0.4%).
General Mills - Uncertain About COVID Impact
March 18, 2020
General Mills reported sales for the quarter ending February 23, 2020.
Organic net sales flat, including a 50bps headwind from lower Häagen-Dazs net sales in Asia as consumer traffic dipped in the brand’s shops and foodservice outlets.
It is uncertain about the impact of COVID-19 on the full-year fiscal 2020 results. It has seen higher orders from retail customers in North America and Europe, but a drop in demand in Häagen-Dazs channels.
General Mills says it is unclear how increased demand for at-home food will impact its sales, but it has provided a 1-2% growth outlook for organic net sales in the full year, assuming its supply chain faces only minimal disruption.[Image Credit: © General Mills]
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