Trader Talk

Food Companies in Tough Spot Now

Food and personal care giant Unilever (think Hellman's mayonnaise, Ben & Jerry's, Lipton tea, Dove soap, etc.) the latest food company to report being caught in a vise:

1) lower prices for their products

2) higher commodity prices

3) difficult consumer in U.S. and Europe

Unilever sells all over the world — about a third from the Americas, a third from Europe, and a third from Asia/Africa.

Sales globally were up 3.6 percent, but that was below expectations.

And it's been uneven: while emerging market sales were up 11.2 percent, Europe was DOWN 2.2 percent.

This is the same story that Procter & Gamble and Colgate reported: higher spending on advertising, lower prices, a consumer reticent to spend, and sluggish sales.

Now, throw in higher commodity prices (wheat way up due to a drought in Russia)...and these companies are really caught in a margin squeeze.

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