Essity flags weaker U.S. restaurant demand as hygiene unit faces sales pressure

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Essity flags weaker U.S. demand

Highlights

Essity's professional hygiene unit saw third-quarter sales, volumes, and prices decline due to weaker U.S. restaurant demand compared to Europe.
Essity is raising prices across business areas to counter increased raw material and energy costs, after previously lowering prices in some categories.
Gallup reports only 39% of Americans dine out weekly in 2023 versus 53% in 2019, highlighting ongoing pressure on consumer goods suppliers amid slowing wage growth and persistent inflation.

U.S. demand weakness hits third-quarter performance

As reported by Reuters, Essity Chief Executive Ulrika Kolsrud says consumers in the U.S. are not going out to restaurants as much as they do in Europe, increasing pressure on the Swedish hygiene products maker's professional hygiene business.

The unit, which sells products such as Tork paper towels to restaurants and other businesses, sees sales, volumes and prices all fall in the third quarter. Essity also flags higher costs of goods sold, while management says it is again raising prices across business areas to offset higher raw material and energy costs after previously lowering them in some categories.

Kolsrud's comments point to a sharper slowdown in demand among Essity's U.S. restaurant customers than among its European ones, a notable challenge for a division with a large exposure to the U.S. market.

Consumer strain shapes outlook for suppliers

The pressure comes as U.S. consumers face persistent inflation and a softer labor market. U.S. consumer prices rise 3.7% in September from a year earlier, while average hourly wage growth stands at 3.0% over the past 12 months, and employers excluding farms add 29,000 jobs during the month.

A Gallup survey published on Wednesday shows that 39% of Americans eat at restaurants at least once a week, down from 53% in 2019. That trend adds to the challenge for consumer goods companies trying to balance price increases against the risk of weakening demand after several years of inflation-driven hikes.

Essity says the pressure from higher prices is sharpest at the lower end of the income scale. The latest Federal Reserve survey, covering 2022 to 2025, shows that income gains for less well-off households do little to build wealth, and net worth for the bottom fourth of households falls by more than 50%.

In our earlier article on Walmart’s inflation-driven momentum, we noted that persistent price pressure is pushing more budget-conscious U.S. shoppers toward the retailer and supporting expectations for market share gains. We also highlighted Walmart’s efforts to expand higher-margin businesses and digital services, including AI tools aimed at increasing basket size and improving efficiency—an approach designed to protect margins even as consumer demand shifts.

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