Bare Necessities

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What's going on?

Consumer staples giants Unilever and Coca-Cola reported impressive quarterly results on Tuesday.

What does this mean?

Unilever upped prices by 11% last quarter, and it’s easy to see why: the company said it’s expecting the prices of the materials it uses to make its products – everything from palm oil to natural gas – to drive up costs by nearly $5 billion this year. But while the company sold 2% fewer products on the back of the move, it also seems like it was the right one to make: Unilever’s overall sales were 9% higher than the same time last year.

Coke was in a similar boat: its organic revenue climbed 16% last quarter, even as it pushed up prices by 12%. It benefited from the fact that around half its sales come from social venues like cinemas and theme parks, which have been getting a lot more love since Covid faded into the background.

Why should I care?

Zooming in: All publicity is good publicity.
Unilever upped its sales growth outlook for the rest of the year too, but the company knows it won’t hit its target just by raising prices. Cue a different approach: Unilever’s planning to boost its investment in advertising, having already stepped up marketing spending by around $200 million in the first half of the year. That way, it’s hoping customers will realize its products are worth every penny.

The bigger picture: Walmart’s glory days are gone.
Unilever’s sales might be holding up for now, but there are signs Americans are reining in their spending. Just look at Walmart, which issued its second profit warning in 10 weeks on Monday. No surprises there: the world’s biggest retailer specializes in low-income customers who are typically the first to scrap big-ticket buys and trade down to cheaper – and ultimately less profitable – products (tweet this).

Originally posted as part of the Finimize daily email.

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