S&P: energy and costs spell trouble for dairies

A new analysis by Standard & Poor (S&P) suggests that European food processors will need to cut costs to meet the rising prices of energy and plastic packaging.

Though some companies have raised their product prices, S&P believes others have limited ability to do so in Europe’s competitive market.

Among the European consumer goods companies rated by S&P, 25% have negative forecasts. Stable ratings apply to such companies as Wimm-Bill-Dann Foods, Unilever and Danone. However, S&P sees a poor outlook for Nestle, which it claims is showing resilience but with a financial position limiting its ability to fund large debt-financed acquisitions.

S&P also downgraded Greek yogurt maker Fage Dairy from a B+ to B in its ratings, stating‚ “The rating action was driven mostly by weaker operating performance, prompted by increased private-label competition focused on the value segment of the local yogurt market.”