Time for Corporations to Give Back

Dec 11, 2023 | Macro Insights, No Bull Economics

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With 3Q23 results mostly in, the 80+ consumer companies under NoBull’s coverage reported a median sales increase of +5% y/y and a median EBITDA increase of +11% y/y. While we are certainly rooting for these companies, the stressed consumer could use a break and many of these leading brands would enjoy a lot of goodwill by lowering their retail prices. This would represent the best type of cause marketing that we can think of, a break for the working poor…

Commentary

  • Even though sales growth for NB’s coverage group slowed from +7% y/y during the LTM period through 3Q23 to +5% y/y during the third quarter, consumer companies continue to enjoy healthy top-line growth.
  • Even more notable is the group’s +11% y/y EBITDA growth during 3Q23, which was more than double sales growth. This reflects that many of these companies have been able to retain stiff price increases instituted over the last several years at a time when input prices have finally begun to moderate.
  • While it is understandable that these companies are simply recouping previous profit pressures driven by post-covid inflation, their customers also need a break.
  • It is very common for many of these companies to raise donations from customers for their cause marketing initiatives. Sometimes the companies will also contribute donations of their own.
  • However, we suggest that the best form of cause marketing for a company is to pass back “margin harvesting” to its loyal customers such that it is clear to all stakeholders that everyone will share equally in the pain of a poorly managed economy and everyone will also share equally when things improve.      

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