# Big companies manage to pass on soaring costs to cash-strapped consumers
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2022-04-21
Category: NEWS
Category URL: https://financedigest.com/category/news
Meta Title: Europe's biggest firms raise prices, boost profits
Meta Description: Learn how European companies like Nestle, Danone, and ABB are raising prices and still reporting strong first-quarter sales performances despite inflation
URL: https://financedigest.com/big-companies-manage-to-pass-on-soaring-costs-to-cash-strapped-consumershtml

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By John Revill

ZURICH (Reuters) -Makers of chocolate bars and coffee to lawn mowers and industrial robots succeeded in passing on soaring costs to consumers, first-quarter earnings showed on Thursday, allaying fears higher prices could dent demand for their products.

Some of Europe’s biggest companies reported first quarter sales increases, with KitKat maker Nestle, Evian water owner Danone and Dulux paint maker Akzo Nobel saying they were able to accomplish the gains while raising their prices.

Engineering company ABB and gardening equipment [maker Husqvarna also reported strong demand despite both increasing prices](https://www.financedigest.com/analysis-to-raise-prices-or-not-consumer-goods-makers-weigh-bets-on-buyer-strength.html "Analysis-To raise prices or not? Consumer goods makers weigh bets on buyer strength").

[“Pricing power](https://www.financedigest.com/belgium-supports-energy-price-caps-suspending-trading-in-eu-power-crunch.html "Belgium supports energy price caps, suspending trading in EU power crunch") does exist. Across multiple categories. In [European food](https://www.financedigest.com/european-food-delivery-shapes-up-with-getirs-gorillas-buy.html "European food delivery shapes up with Getir’s Gorillas buy"), it is called Nestle,” said Bernstein analyst Bruno Monteyne.

Outside Europe, Tesla surged past Wall Street expectations on Wednesday, as higher prices helped insulate the [electric vehicle maker](https://www.financedigest.com/lack-of-electric-vans-opens-door-for-chinese-other-ev-makers.html "Lack of electric vans opens door for Chinese, other EV makers") from supply chain chaos and rising costs. \[nL3N2WI3AV\]

The big U.S. airlines United Airlines Holdings [Inc and American Airlines Group Inc reported that high fares have not dented demand](https://www.financedigest.com/token-inc-launches-london-office-to-answer-demand-from-european-banks.html "Token, Inc. Launches London Office to Answer Demand from European Banks") for domestic travel. Both airlines forecast a [return to profitability](https://www.financedigest.com/uks-j-d-wetherspoon-returns-to-profit-as-supply-issues-ease.html "UK’s J D Wetherspoon returns to profit as supply issues ease").

The demand environment is very strong,” American Airlines [Chief Executive](https://www.financedigest.com/exotix-draws-sberbanks-us-chief-executive-in-triple-hire-to-extend-global-capabilities.html "Exotix Draws Sberbank’s US Chief Executive in Triple Hire to Extend Global Capabilities") Robert Isom said in a statement.

But while [cheering investors](https://www.financedigest.com/despite-the-headwinds-investors-have-important-reasons-to-be-cheerful.html "DESPITE THE HEADWINDS, INVESTORS HAVE IMPORTANT REASONS TO BE CHEERFUL"), with Nestle, ABB and Akzo Nobel enjoying share price gains, the strategy is stirring worries about households’ ability to cope and the outlook for the rest of the year.

[Rising interest rates and lagging pay deals](https://www.financedigest.com/u-s-mid-tier-lenders-shares-rise-in-frankfurt-after-svb-deal.html "U.S. mid-tier lenders shares rise in Frankfurt after SVB deal") are squeezing consumers, who are seeing their disposable incomes shrink and shopping bills rise.

There have been some signs in U.S. retail data that [consumers have begun cutting back on discretionary spending](https://www.financedigest.com/50-of-consumers-wont-spend-more-than-20-minutes-applying-for-financial-products-online.html "50% of consumers won’t spend more than 20 minutes applying for financial products online") amid high inflation and companies that thrived during the pandemic have lost some of their edge.

On Tuesday, Netflix Inc blamed inflation, the [war in Ukraine](https://www.financedigest.com/ukraine-seeks-debt-payment-freeze-as-war-ravages-economy.html "Ukraine seeks debt payment freeze as war ravages economy") and fierce competition on a loss of subscribers for the first time in more than a decade.

And while Nescafe owner Nestle was among the winners on Thursday, reporting a 7.6% rise in organic sales during the first three months of the year, its CEO later warned that [inflation has made its profit margin](https://www.financedigest.com/inflation-boosts-jeronimo-martins-q4-profit-but-dents-margins.html "Inflation boosts Jeronimo Martins’ Q4 profit but dents margins") target more challenging.

Nestle [beat a 5.0% average forecast for the sales measure that strips out currency swings and M&A deals in a company-compiled consensus thanks to price increases](https://www.financedigest.com/coca-cola-hbcs-annual-profit-beats-warns-of-price-increases.html "Coca-Cola HBC’s annual profit beats, warns of price increases") of 5.2%.

We stepped up [pricing in a responsible manner and saw sustained consumer](https://www.financedigest.com/france-leans-on-retailers-to-help-consumers-cope-with-food-prices.html "France leans on retailers to help consumers cope with food prices") demand,” the Swiss company, whose products include Purina pet food and Nespresso, said.

MORE HIKES LIKELY

Still the [world’s biggest food group said the current price](https://www.financedigest.com/world-food-prices-hit-record-high-in-2022.html "World food prices hit record high in 2022") rises were unlikely to be the last.

Cost inflation continues to increase sharply, which will require further [pricing and mitigating actions over the course of the year,” Nestle](https://www.financedigest.com/nestle-sales-soar-as-price-rises-drive-growth.html "Nestle sales soar as price rises drive growth") added.

French peer Danone, whose product line up includes Activia yoghurt and Evian water, said it was also ready for further rounds of [price increases “if needed” after reporting a 7.1% sales](https://www.financedigest.com/renault-revenues-rise-30-in-q1-on-higher-sales-and-prices.html "Renault revenues rise 30% in Q1 on higher sales and prices") increase late on Wednesday.

The world’s biggest yoghurt [maker benefited from price increases at the start of the year as well as easier comparisons and stronger demand for baby formula in China](https://www.financedigest.com/lighting-maker-signify-cuts-2022-outlook-again-on-china-business-lighting.html "Lighting maker Signify cuts 2022 outlook again on China, business lighting").

Higher prices could be a sensitive topic in its French [home market where the cost of living](https://www.financedigest.com/still-living-at-home-a-third-of-the-nation-cant-afford-to-rent.html "Still living at home? A third of the nation can’t afford to rent") crisis sets the tone for the presidential runoff between incumbent Emmanuel Macron and his right-wing challenger Marine Le Pen.

Price rises have also not hurt demand for Dutch paint and coatings maker Akzo Nobel, which beat [quarterly core](https://www.financedigest.com/ericssons-quarterly-core-profit-misses-expectations.html "Ericsson’s quarterly core profit misses expectations") earnings estimates on Thursday while reporting a 17% increase in prices compared with a year earlier.

[CEO Thierry Vanlancker said that the group’s](https://www.financedigest.com/shareholder-group-iss-backs-barclays-board-over-former-ceo-staley.html "Shareholder group ISS backs Barclays board over former CEO Staley") “vigorous pricing initiatives” had helped it manage “the unprecedented variable cost inflation that impacted our industry during the quarter.

Beyond the consumer area, [factory robots and industrial drive maker ABB also reported a 21% jump in orders during its first quarter despite](https://www.financedigest.com/asias-factory-activity-contracts-despite-chinas-covid-reopening.html "Asia’s factory activity contracts despite China’s COVID reopening") increasing prices.

[CEO Bjorn Rosengren said there were was no end in sight to price](https://www.financedigest.com/uks-ofcom-delays-bt-fibre-pricing-decision-after-ceo-remarks.html "UK’s Ofcom delays BT fibre pricing decision after CEO remarks") increases for components and metals, as well as rising transport costs.

This meant ABB would have to continue to lift prices to deal with it, he said, although there was no sign of [customers holding](https://www.financedigest.com/bahamas-regulator-holds-ftx-assets-pending-delivery-to-customers-creditors.html "Bahamas regulator holds FTX assets pending delivery to customers, creditors") back from equipping their factories with new products.

They are still [placing orders](https://www.financedigest.com/ryanair-places-major-boeing-order-after-jet-price-spat.html "Ryanair places major Boeing order after jet price spat"), I guess they are accepting it,” Rosengren told reporters. We are not the only one [lifting prices](https://www.financedigest.com/global-equities-waver-on-inflation-view-as-falling-oil-supplies-lift-prices.html "Global equities waver on inflation view as falling oil supplies lift prices"), everyone is doing that in the market. That is the new reality.”

Also on Thursday, Husqvarna, the world’s biggest maker of gardening power equipment, said it was raising prices further this month in [response to rising supply and energy costs](https://www.financedigest.com/indefensible-uks-sunak-under-fire-over-response-to-cost-of-living-crisis.html "‘Indefensible’: UK’s Sunak under fire over response to cost of living crisis") and said it had no indication retailers were holding back.

They accept the price increases,” Henric Andersson, CEO of the Swedish [group told Reuters after the earnings report](https://www.financedigest.com/uk-report-warns-of-impact-of-islamist-groups-in-prisons.html "UK report warns of impact of Islamist groups in prisons").

(Reporting by John Revill, Silke Koltrowitz, Valentine Baldassari, Anna Ringstrom and Dominique Vidalon, and Doyinsola Oladipo writing by John RevillEditing by Josephine Mason, Tomasz Janowski and Marguerita Choy)


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