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Less-Diversified Firms More Vulnerable To Commodity Price Spikes, Says Moody's

Less diversified, higher levered European consumer goods firms are more vulnerable to commodity price spikes, and therefore credit quality erosion, over the next 12 to 18 months, a new report by Moody's has found.

According to Moody's, higher energy and food prices are likely to 'erode' consumer confidence and household purchasing power in the coming months, and companies that are more 'more diversified geographically or by product, or which are better able to quickly pass costs through to customers, are better able to preserve their credit quality'.

It said that market leaders are likely to have an advantage over second tier brands, or indeed private label, in terms of the ability to pass on higher prices – said brands have stronger purchasing power and a first-mover advantage in price discussions with key customers.

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