This would lead to cautious consumer spending, constraining premiumisation—a growth strategy where some category volume is converted to a higher value by persuading consumers to pay more for it—and resulting in trade-down in certain product categories, Fitch noted.

High cumulative inflation over the past two years in the EMEA region has pressured consumers' purchasing power, resulting in intense competition and pressure on sales volumes.

Fitch expects the consumer products sector to see modest profitability gains as companies continue to benefit from 2022-2023 price increases, as well as declining prices on some commodities, portfolio optimisations and efficiency initiatives.

However, it also expects these benefits to be partly offset by increased investments in marketing, advertising and promotion to boost volumes while constraining further price increases.

Fitch anticipates low- to mid-single-digit revenue growth in the consumer products sector this year, driven by a more balanced contribution from price mix and sales volumes compared to mainly price driven growth in 2023.

Companies with greater exposure to emerging markets are likely to see higher sales growth due to stronger fundamentals, Fitch said in a note.

The sector may also see a marketing and advertising resurgence as economic uncertainty subsides and interest rates stabilise, while deleveraging capacity will remain limited.

Fibre2Fashion News Desk (DS)