Unilever, Coke and Pepsi are making big sales, but inflation is eating away at their bottom line

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US inflation remained higher than a bag of Flamin’ Cheetos in January, as the consumer price index hit a four-decade high of 7.5%.

And the owner of those Flamin’ Cheetos, PepsiCo, felt the burn. Global food and drink giant, its main rival Coca-Cola and consumer goods giant Unilever all reported robust earnings on Thursday, but the impact of rising costs on their profits was plainly visible.

Consumer Goods and Evils

Besides their eponymous brands, Coca-Cola has a long list of beverages, while PepsiCo’s portfolio also includes foods like chips and oatmeal. Unilever has dozens of consumer brands, including condiments (Hellman’s), ice cream (Ben & Jerry’s, Klondike) and hygiene products (Axe deodorant, Q-tips). All three are incredibly useful barometers for measuring consumer behavior in the reopened economy and the impact of inflation on businesses.

The good news is that sales are strong. Food and beverage brands again benefited from the resumption of foot traffic in bars, restaurants and eating places like cinemas and stadiums. Coke said Tuesday that its fourth-quarter 2021 sales in those locations exceeded pre-pandemic 2019 for the first time. Overall, Coke’s revenue increased 9% in the quarter, with PepsiCo rose 12% and Unilever said its 4.5% sales increase last year was the best growth in nine years. The bad news is that they couldn’t cash out those winnings, because they’re being nibbled on, Like Homer Simpsonby inflation:

  • Coke’s profit fell 28% in the quarter and PepsiCo’s 9% – both pay more for sugar in their drinks, plastic and aluminum in their containers, and to ship goods around the world whole.
  • Unilever did not disclose fourth-quarter earnings, but said its underlying operating margin for 2022 was likely to fall 16% to 17%.

All three companies raised prices for their products last quarter, but warned that inflation would continue to eat away at their results this year.

Listen : Unilever, meanwhile, had to abandon plans for major acquisitions. A surprise $68 billion bid for GlaxoSmithKline’s consumer healthcare division collapsed last month and infuriated many investors – one top shareholder called it a “near-death experience” – who want the company to focus on its core business which is lagging behind rivals Procter & Gamble and Nestlé.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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