European Shoppers and Retailers Show Reluctance to Accept Higher Prices for Consumer Goods Compared to Americans
Industry executives, analysts, and economists have revealed that European shoppers and retailers are displaying less willingness than their American counterparts to embrace higher prices for a wide range of consumer goods.
Major companies such as Unilever, renowned for producing popular brands like Hellmann’s mayonnaise and Vaseline, and Procter & Gamble, known for products like Ariel detergent and Pampers nappies, reported weaker sales volumes in Europe compared to the United States during the last quarter.
In an attempt to offset the unprecedented rise in raw material costs, consumer goods manufacturers have implemented price increases across global markets. Last quarter, both Unilever and P&G raised prices by an average of approximately 10%.
The sensitivity of shoppers to price fluctuations, also known as price elasticity, varies depending on the product and local market. It is worth noting that not every company has experienced a decline in volumes in Europe.
However, several executives noted that the challenging financial circumstances faced by European households have made it increasingly difficult to raise prices without sacrificing sales volume. Additionally, European consumers have shown a greater willingness to switch to more affordable private label alternatives available in supermarkets. This is primarily due to the more advanced development of the private label market in Europe compared to the United States.
Graeme Pitkethly, the finance director at Unilever, highlighted the higher price elasticity observed in Europe. While Unilever experienced a 3% decline in volumes in Europe, it saw a 0.6% increase in the Americas, despite similar price increases in both regions.
Pitkethly pointed out the prevalence of discounters such as Aldi and Lidl in Europe, along with the growing market share of private label products, particularly in categories like ice cream.
According to Andre Schulten, the chief financial officer of Procter & Gamble, inflationary pressures in Europe had a more significant impact on consumption during the quarter. P&G reported a 7% decline in sales volumes in its primary markets in western Europe, while volumes remained modestly positive in the United States.
Despite these challenges, P&G managed to achieve an 8% increase in organic sales in western European markets and a 6% increase in the United States, indicating relative resilience in consumer markets globally.
Consumer goods analysts also noted that European retailers possess more bargaining power compared to their American counterparts, which allows them to exert additional pressure on consumer goods companies during negotiations.
Economists emphasized that companies have found it easier to pass on price increases to consumers in the United States due to stronger demand in the market.
The discrepancy in consumer response to price changes between Europe and the United States underscores the complex market dynamics and economic conditions prevalent in each region