S&P Global – Consumer Products Credit Outlook, 2024

The report by S&P Global's Consumer Products Credit Outlook for 2024 highlights several key changes and assumptions in the consumer products industry. Firstly, it is predicted that branded consumer product companies will slow down their pricing growth to the mid-single digits on average. This indicates that price increases will not be as prevalent as before. Additionally, mature markets are expected to experience a decline in volumes by low- to mid-single digits. This is attributed to consumers seeking value and opting for cheaper private-label alternatives. The report emphasizes the importance of working capital management in this changing landscape. With weaker sales volumes, companies will need to optimize their inventory management to generate free cash. In terms of key assumptions for 2024, it is expected that cost pressures will decrease as input costs lower. This is due to lower sales volumes and cautious ordering from retailers, leading to increased capacity in supply chains. Advertising and promotional spending is projected to increase as competition intensifies. Gross margin gains from lower input costs and carryover pricing gains will be used to strengthen brand equity. The report also suggests that most rated companies will adhere to their financial policies without significant changes to shareholder returns and merger and acquisition strategies. However, there are several risks identified in the baseline scenario. Sales volumes are expected to decline sharply in major consumer markets, particularly in China and the US. Companies with highly leveraged capital structures may struggle to refinance amid weak operating performance and tight capital markets. Finally, geopolitical tensions could worsen, potentially leading to commodity price volatility and negative impacts on global trade and consumer sentiment.