Giants Unilever, Nestlé and Procter & Gamble protect margins as customers foot bill

A focus on “billionaire brands” is helping the world's 50 biggest consumer goods companies to defend against spiralling cost price inflation - and to pass the bill on to shoppers.

A new report shows that despite record energy prices and the rising cost of wheat and rice, the gross margins of companies such as Unilever, Nestlé and Procter & Gamble (P&G) have slipped by an average of only 0.1 per cent in the past two years.

Over the same time, customers across the Western world have seen prices surge by 5.5 per cent.

Chris Outram, chairman of OC&C, the strategy consultancy, said: “The customer does appear to be footing the bill.”

He said that by concentrating on popular global brands such as Dove, Duracell, Sunsilk and Vittel, consumer goods companies have gained far more muscle in their price negotiations with retailers.

Mr Outram said: “Manufacturers have redressed the balance of power. If you have a 'must-have' brand, it is much harder for retailers to drop you or demand the supplier absorbs all the price increase.”

P&G generates more than two thirds of its annual revenue from only 23 brands, including Oral B, Pampers and Wella, each of which has sales of more than $1 billion (£505 million) a year. Dove generated $2.5 billion of sales for Unilever in 2007, while Nestle's top 31 products account for 70 per cent of its food and drink turnover.

Mr Outram conceded that while 2007 was a record year for consumer goods companies, 2008 was likely to prove tougher as fears of a recession bite into consumers' discretionary spending. He added that many companies were stepping up expansion in India to offset any weakness in mature markets, such as Cadbury's, which developed “Chocki”, a chocolate-flavoured drink, for India and now is exporting the brand into Kenya and Sri Lanka.

Nestlé remained the world's biggest consumer goods company in 2007, with grocery sales of $83.6 billion.