Moody's is anticipating a 'stable' outlook for the consumer goods sector over the next 12-18 months, with average operating profit growth of 3% to 5% expected.
This is lower than the 4% to 7% profit growth that the ratings agency previously forecast, due to an expected smaller boost from pricing, it noted.
'Growth will be driven by the gradual macroeconomic recovery and improving consumer sentiment as inflation slows and consumers adjust to higher prices,' said Moody's.
Within the beverage sector, profit growth is expected to slow, Moody's said, with operating forecast expected of between 3% to 6% for the overall segment over the 12-18 month period.
For alcoholic beverages, high inventory levels and softening demand are likely to curb volume growth, but premiumisation will help to support profit growth in 2025. In non-alcoholic beverages, such as soft drinks, producers are likely to 'find it harder to sustain the very strong performance of 2023 and some companies might struggle to raise prices', said Moody's.
Packaged Food Companies
Packaged food companies are likely to rely less on increased prices over the coming 12-18 months, which will curb margin improvement. For the overall packaged food sector, Moody's is forecasting average operating profit growth of around 3% to 5%.
Growth will be more substantial for larger, more international companies, while it will be more modest for domestically-focused companies in developed markets, Moody's said.
Elsewhere, the performance of packaged goods companies is likely to demand on their product mix and market exposure, Moody's said, with operating profit growth of between 4% and 7% expected; while durable goods will likely see operating profit growth of between 3% and 7%.
Finally, tobacco is likely to see increased price rises, offsetting slowing sales volumes. Operating profit growth in this segment is expected to come in at between 2% and 4%.
Improving Economic Outlook
Commenting on the overall consumer goods sector, Moody's added, 'We would consider changing the outlook to positive if we continue to expect operating profit growth of more than 4%, but this would need to be combined with an improving economic outlook, stronger consumer sentiment and volume recovery.
'We would consider moving the outlook to negative if we expected flat to declining average operating profit.'
