FTSE 100: Unilever raises prices of hundreds of products in biggest ever hike
Consumer goods maker Unilever (ULVR.L) has raised prices by 12.5% in the biggest increase in its history amid rampant inflation.
The maker of brands ranging from Dove personal care products and Lipton tea to Ben & Jerry’s and Magnum has raised prices across its 400 brands, including soaps, beauty products, detergents and ice cream.
The FTSE 100 (^FTSE) company admitted that the price increases had had “some negative impact”, with consumers buying fewer home care products following the hike. Unilever's home care division declined 3.6%.
Its home care division led the price increases, with a 17.8% jump in price of everyday household products such as detergents Omo, Sunlight and Comfort and cleaning product Cif.
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Items under its Beauty & Wellbeing arm including dove soap, sunsilk hair care products, functional beverages Liquid I.V. and dermalogica skin care products, experienced a 7.3% increase in price.
Nutrition, which includes brands like Knorr, Hellmann's, Horlicks and Maille, saw a 11.7% price hike.
Not even ice creams managed to dodge the increases, with the division holding Ben & Jerry's, Magnum, Cornetto and Wall's reporting a 12% jump in price.
Geographically, the Americas experienced the biggest price increases in the quarter, with a 15.4% increase, followed by Asia Pacific and Africa with 12.1% and Europe at 8.9%.
Unilever had also reduced the pack sizes of some products to prevent further price rises.
“Pack size is only one lever in managing pricing and affordability…very often there’s a good reason for that because hitting a particular price point is important to consumers," Graeme Pitkethly, chief financial officer, said.
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The company also warned of declining sales volumes as inflation-squeezed consumers cut on household essentials.
Sales volumes fell 1.6% during the third quarter as Unilever warned of “more negative underlying volume growth” in the final three months of the year.
Pitkethly said "consumer sentiment in Europe is at an all time low" as he warned of fears of a "confluence of events" in Europe with energy prices and inflation rising and consumers' savings waning.
He added: "Both the premium segments of the market and the value segments of the market are actually growing quite quickly, at an equivalent rate."
But Pitkethly said inflation and the promise of austerity in some countries has prompted a cost of living crisis that is pushing some people towards cheaper alternative products, such as private label goods made by retailers.
"The basic needs of our European consumers are occupying a higher share of wallets — things like utilities, transportation and food — and there tends to be cut back on discretionary non-food items."
Despite this, Unilever raised its sales forecast for this fiscal year to increase by more than 8%, up from a prior range of 4.5% to 6.5%.
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In the the three months to the end of September Unilever’s underlying sales growth rose 10.6% to €15.8bn (£13.78bn/$15.9bn) from 8.9% over the whole nine month period.
Freetrade's senior analyst Dan Lane said: “A much brighter picture from Unilever today but there’s still a while to go before inflationary pressures stop hitting the bottom line.”
But he added: “Even with a hike in sales growth It still looks like the firm will miss [chief executive officer Alan] Jope’s 20% margin goal for the year, and will have to strap in for higher material costs in 2023.”
Matt Britzman, equity analyst at Hargreaves Lansdown, said: “Raising prices and keeping volumes ticking higher is beginning to become a mammoth challenge, especially at the scale Unilever’s pushing through the price tags.
“The group did warn volume declines are likely to accelerate up to the full year mark. That’s in line with what we’re seeing across the market, with cost pressures starting to have a bigger effect on consumer spending habits as pent-up demand and savings start to fade away.”
