By Saabira Chaudhuri 

LONDON--It isn't as easy as it used to be to deliver the steady sales growth investors have come to expect from the world's biggest consumer-product makers.

Consumer-goods stocks have long been a haven in times of macroeconomic uncertainty--demand for everyday items such as bottled water and laundry detergent tends to stay consistent in good times and bad. But a slew of recent sales reports from global consumer-product companies suggest many are grappling with an unusual confluence of big challenges, from choppy emerging markets and local competition to rising commodity prices and currency swings.

On Wednesday, Reckitt Benckiser Group PLC reported its slowest like-for-like sales growth since mid-2011 and lowered its sales outlook for the year. The U.K.-based maker of Durex condoms and Lysol disinfectants blamed tough markets in Russia--and a stumble trying to innovate a popular Scholl foot file--for a meager 2% rise in third-quarter like-for-like sales, which missed analyst estimates. Reckitt shares were down almost 3% in midday London trading.

Last week, Unilever PLC--the world's second-largest consumer-goods company, behind Procter & Gamble Co.--flagged rising prices for commodities including palm oil, crude oil and aluminum. It reported a 3.4% rise in underlying third-quarter revenue. Troubling for investors, the higher sales were driven entirely by price increases, not volume growth.

Since 2013, Unilever has leaned heavily on volume to drive growth, a strategy investors typically like because it signals strong underlying demand. In the third quarter, though, Unilever's volumes declined 0.4% from a year earlier in a marked deceleration from the 1.8% growth it reported in the second quarter.

"Economic fundamentals remain weak and volatile," said Unilever Chief Financial Officer Graeme Pitkethly on a Thursday conference call, also citing currency devaluation in Latin America as having squeezed disposable income. The industry's third-quarter volumes fell by 10% in Brazil and by 7% in Argentina.

"When currencies weaken, the cost of living goes up faster than incomes, and people either cut back on purchases or they down-trade," Mr. Pitkethly said.

Unilever signaled it was pushing the cost of those currency swings to consumers--or at least to the middlemen, like grocers--that buy Unilever products, from Dove soap to Ben & Jerry's ice cream. Last week, Britain's largest grocer, Tesco PLC, temporarily pulled Unilever products off its online shopping site amid a pricing dispute. Unilever said last week it was raising prices for all of its U.K. customers to offset the sharply falling pound after Brexit.

Apart from a downturn in Russia, Reckitt's growth is also slowing in Europe. Political turmoil in Turkey and challenges in Africa and the Middle East have hurt sales, as well.

Executives expect the bumpy sales environment to get tougher still through the rest of the year, as companies that were protected by hedges start to feel the full impact of higher commodity prices.

"You should expect things to remain, in aggregate, choppy," Reckitt Benckiser Chief Executive Rakesh Kapoor told investors.

Across the pond, P&G in August offered a sluggish sales outlook for fiscal 2017 and said its adjusted per-share earnings for the fourth quarter dropped 8% on a constant-currency basis. The Cincinnati-based company reports first-quarter earnings next week. Analysts have criticized P&G for relying on cost cuts rather than improved sales to drive profitability.

On Tuesday, French yogurt and bottled-water company Danone SA reported its lowest quarterly like-for-like sales growth since 2009, at just 2.1% for the third quarter. The company said regulatory changes in China had slowed sales of baby food and noted that Russia and Brazil have remained tough places to do business.

More broadly, Danone--which owns yogurt brands including Dannon, Activia and YoCrunch--flagged that milk prices are rising and said it plans to boost efficiency and productivity to protect margins.

Danone was also hit by volatile currencies, saying the Argentine peso, the British pound, the Mexican peso and the Chinese yuan had combined to reduce sales growth by 4.1%.

China has also created problems for Nestlé SA, which on Thursday will report third-quarter results. There is a lot riding on that report after the world's biggest packaged-food company in recent quarters delivered organic sales growth that fell short of its long-term target of 5% to 6%.

Nestlé's sales have been hurt by slowdowns in major markets, including China and Europe, and deflationary forces that have made it hard to raise prices.

Write to Saabira Chaudhuri at saabira.chaudhuri@wsj.com

 

(END) Dow Jones Newswires

October 19, 2016 10:01 ET (14:01 GMT)

Copyright (c) 2016 Dow Jones & Company, Inc.
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