Jefferies analysts have reshuffled their ratings on two of Europe's largest food companies, downgrading Danone while upgrading Nestle to Buy, in a note published on Thursday. The adjustments reflect divergent outlooks on margin resilience and volume growth in the consumer staples sector, which has faced persistent cost inflation and shifting consumer behaviour.
Danone, the French dairy and plant-based giant, was cut from Buy to Hold. Jefferies cited concerns over the company's ability to restore margins amid rising input costs and a slower-than-expected recovery in volumes across key markets. The downgrade comes despite Danone's recent efforts to streamline its portfolio and focus on higher-growth categories.
In contrast, Nestle, the Swiss food and beverage heavyweight, was upgraded from Hold to Buy. The bank highlighted Nestle's stronger pricing power, disciplined cost management, and exposure to premium segments as key drivers. Analysts noted that Nestle's diversified geographic footprint and robust supply chain give it an edge in navigating ongoing inflationary pressures.
The reshuffle has implications for UK investors and pension holders with exposure to European equity funds or global consumer staples ETFs. Danone and Nestle are widely held in passive and active portfolios, and rating changes can influence short-term share price movements. The broader sector has been under pressure as rising interest rates and squeezed household budgets weigh on demand for branded goods.
Market reaction was muted in early trading, with Danone shares edging down 0.4% in Paris, while Nestle shares rose 0.6% in Zurich. The FTSE 100, which has limited direct exposure to these stocks, was little changed, though analysts said the ratings shift could prompt a re-evaluation of other European food companies.