Food Fight


Image source: Keith Homan, chrisdorney, imwaltersy, Tatiana Popova, chrisdorney, abimages - Shutterstock

What's going on?

Arch-rivals Unilever and Nestlé – two of the world’s largest consumer staples companies – reported quarterly updates on Thursday. And in a reversal of last quarter, investors sided with Unilever’s stock over Nestlé’s.

What does this mean?

Anglo-Dutch Unilever – the gastronomic powerhouse behind Ben & Jerry’s ice cream and Hellmann’s sauces – grew its third-quarter “organic” sales (which excludes the effects of currency swings and acquisitions) by 2.9% versus the same time last year. But that was lower than investors had been expecting, since growth in emerging markets like India, China, and South America wasn’t as high as hoped.

Switzerland’s Nestlé, meanwhile, saw its organic revenue grow by 3.7% over the same period – higher than its rival’s and bang on what investors had predicted. The candy bar-maker probably deserves to have a break after besting Unilever in 2019, which may be the reason Nestlé’s stock price had risen by double Unilever’s so far this year.

Why should I care?

Zooming in: Sweet, sweet profits.

Nestlé’s outperformance this year might’ve led some investors to sell their shares and lock in their profits on Thursday: its stock fell 2%. And that’s despite announcing it’d give shareholders an additional $20 billion via share buybacks or extra dividends over the next three years, following the successful sale of its skincare business (unless it finds another company to buy instead). A higher-growth and more profitable post-sale Nestlé should attract new investors, not to mention please existing ones.

For markets: You’re being so defensive.

Consumer staples companies sell products people buy whatever the economic weather. In other words, they’re “defensive”. As economic growth slows then – UK retail spending, for instance, froze in September versus August – investors will look for companies where customer demand is typically resilient even if prices get raised, which could push their stock prices higher (tweet this).

Originally posted as part of the Finimize daily email.

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Stanning Morgan

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