Azerbaijan, Baku, April 1 / Trend /
Higher commodity prices will increase food companies' costs by 9 percent to 11 percent this year on average, potentially curbing profitability, Bloomberg reported according to Morgan Stanley.
Most margin pressure will come in the first half as price increases trail cost inflation, London-based analyst Michael Steib said in a report dated today. Brewers face "margin headwinds'" from higher prices for barley and packaging in 2011, he said.
Pricing "is likely to be difficult, given the weak trading environment in the U.S. and Europe, and will likely take the shape of scaled-back promotions in these regions," Steib said.
Nestle SA (NESN), the maker of KitKat chocolate bars, and Danone SA, the world's biggest yogurt company, should be able to maintain their "core" operating margins for the full year, according to Steib. So should Unilever, the maker of Ben & Jerry's ice cream and Dove soap, he said.
Rising costs for oil-derived chemicals "indicate sustained pressure" for makers of home- and personal-care products, according to Steib. Henkel AG, which makes Right Guard deodorant and Soft Scrub cleaners, is "the most-exposed" in Europe, he said.
Natural oils and oleo alcohols "appear to have come off their peak," meaning a lower impact for cosmetics makers, Steib said.