7 minute read

Analyzing Recent CPG Management Commentary

It was a busy week across the board, with tech, digital advertising, and pertinent to this article, CPG companies reporting results.


I reviewed the earnings results for eight CPG companies that collectively did $300 billion in sales last year to understand:

  1. What are CPG firms most focused on near-term?
  2. What type of unique consumer behavior are they seeing?
  3. What’s the outlook for the rest of the year?

Below are my “notes”, saving you the 20 hours it took to read through and consolidate everything 😅

Near Term Focus is All About Inflation

Within the first couple of minutes reviewing the earnings calls, the near-term focus became VERY apparent. In a chart…


Nearly the entire Q&A sessions with investors focused on how management was planning to manage price and mix in this high inflation environment where some are still dealing with shortage issues.


Ozan Dokmecioglu, CFO & President-International at Keurig Dr. Pepper summed up the vibe the best: “Inflation still looms as the greatest challenge and has proven difficult to forecast, even for the experts.”


Here’s commentary from each company on inflation.


Inflationary Trends

  • Pepsi: Worsened relative to beginning of year when expected low teens – it’s now a few points above that
  • Mondelez: Input cost inflation running low double digit range vs. prior 8% estimate
  • Keurig Dr. Pepper: Expected low teens but saw 15% inflation in 1Q

Specific areas of cost input inflation:

  • Coca-Cola: High fructose corn syrup, PET, metals, wages and transportation
  • Kimberly-Clark: Oil and gas is driving more than half of input cost inflation
  • Mondelez: Cost input inflation coming from energy, transportation, packaging, wheat, dairy and edible oils; 85% Commodity costs hedged through balance of year; shortages in trucking capacity and containers
  • P&G: “…supply constraints are omnipresent in every potential bucket that you can think through. Being able to source raw and pack materials is still difficult in sufficient quantities. Getting raw and pack materials to the places we need to get them to continues to be costly and highly volatile. Labor availability is certainly a stretch, not for P&G directly, but more for our supplier base. And then getting finished product out to our retailers by being able to actually ship with the truck availability in the US, for example, is difficult. So, it’s across all aspects of the supply chain.”
  • Kraft Heinz: Cost of goods inflation expected up mid-teens now vs. prior expectation of low teens
  • Keurig Dr. Pepper: Expected low teens cost inflation and seeing 15% inflation in 1Q; Coffee, resins, aluminum, and packaging are all high

Planned pricing actions for balance of the year:

  • Coca-Cola: Expects to take price more as year progresses
  • Mondelez: Announced mid-single digit price increase for N. America coming in May
  • P&G: Taken price in all 10 product categories in the US; more coming in July for Oral Care; not seeing much resistance from retail partners as they need to raise private label prices too
  • Kraft Heinz: Did price actions in 1Q that will take effect in 2Q; will take further price as well; Seeing PL brands raise prices in line with national brand rivals; Pricing actions running a bit ahead of inflation at this point
  • Keurig Dr. Pepper: Took pricing up 5% in pods during Q; Expects pricing to catch up in subsequent quarters, but behind right now

Ways they are demonstrating value to the consumer:

  • Coca-Cola: Expanding the availability of mini-cans to help continue to offer transaction-driving opening price points
  • P&G: Turn product superiority into value claims placed on pack – like you can use Tide in cold water, get EVERY drop of soap out of Dawn bottle
  • Kraft Heinz: Leaning into value messaging on things like hot dogs, mac and cheese, etc. as consumers may feel pinched by inflation

Consumer Insights

The most notable consumer insight from the analysis relates to the inelasticity consumers are demonstrating in the face of rising prices.

  • P&G: Elasticities better than normal by ~20-30% attributed to the consumer having tried P&G’s higher performance products during CV-19 and are now sticking with it
  • Kraft Heinz: Elasticity running about 30-40% below historical norms
  • Pepsi: Seeing better than average elasticities enabling them to raise guidance for the year; but does expect changes to be coming where the consumer reacts
  • Kimberly-Clark: Not seeing a negative consumer reaction to price increases so far
  • Mondelez: Price elasticity well below historical levels
  • Hershey: Elasticity is better than normal; expecting it to worsen through the year as consumer starts to react to inflation and government stimulus impact lessens

Other notable consumer-related comments included:

  • Coca-Cola: Pandemic abated for the most part driving more consumer mobility
  • Pepsi: Variety packs doing well as aligned with consumers’ desire for portion control, variety and convenience; seeing some less traffic than normal in convenience channels
  • Kimberly-Clark: Starting to lap the destock in tissue that happened a year ago; management sees progress in B2B segment but doesn’t expect it to get back to pre-pandemic levels any time soon
  • P&G: Cough/cold/flu season up 57% Y/Y vs. prior year when everyone was wearing masks; seeing some decline in surface disinfection products Y/Y but not too much
  • Hershey: Easter category sales grew double-digits as community celebrations are back; have not seen consumers slow c-store trips as a result of rising fuel prices, but seeing more visits because they’re not filling up tanks; consumer mobility has returned, but restaurants are not back to where they were pre-CV (part COVID, part paycheck pressure)
  • Kraft-Heinz: They’re unsure where inventory levels out with retailers; 2-3 years prior to CV-19 there was a reduction in inventory levels, but that might not make sense going forward


Several of the firms I reviewed indicated they are still dealing with their own supply issues. However, essentially all of them feel they are a quarter or two away from resolving these, and in some cases, that will lead to more promotional behavior in 2H22.


Every company but Coca-Cola raised their full-year guidance. This is a result of outperformance in the first quarter, which was driven primarily from price increases, in addition to continued strong consumer demand and expectations for further pricing action. It was not uncommon for price increases to account for all of revenue growth in the first quarter (meaning volume/mix was down Y/Y for several firms).


Management teams appear to be making a conservative forecast, expecting more normal demand elasticities to start showing up at some point, citing historical norms (that have so far not been predictive).


Thoughts from Here

CPG Management teams appear upbeat, and all seem very capable of managing through an inflationary environment. This ability has been honed over the years as these firms sell globally, with high inflation more the norm than the exception in many markets.


Consumer demand remains healthy. This isn’t just for CPG companies as Amazon, selling every category, also indicated they see a healthy consumer. The second half of this year could be particularly strong for retail if supply chains catch up, which most CPG companies expect to be the case (although certainly not a foregone conclusion).  

Big picture, I was hoping to hear more about longer-term growth initiatives, especially around digital marketing and eCommerce. There was essentially no discussion of this at the companies I analyzed. This makes me think the greater risk of inflation is the impact it has on longer-term focus. It, along with continued production and retail-wide supply chain issues, will naturally tend to crowd out longer-term thinking especially when investors are solely focused on these near-term macro issues.