Unilever Plc said it’s still pushing up prices as it faces the biggest cost surge in decades with “truly unprecedented” inflation hitting many of its key markets.

The maker of Dove soap and Surf detergent said it is charging shoppers more for products to help offset its own surging costs as it forecast that sales growth will exceed a previously stated range of 4.5 per cent to 6.5 per cent. In a sign that some shoppers are prepared to accept higher prices for consumer products, Unilever said its full-year operating profit margin will be about 16 per cent which is within its guided range. 

The stock rose as much as 3 per cent in London. 

Unilever is among consumer-goods makers performing a careful balancing act as they seek to pass on some price increases to customers without deterring shoppers too much. The company warned earlier this year that it’s facing the worst inflation since the financial crisis and that it will take two years to return to 2021’s profitability level. 

Inflation will likely peak in the second half, around the end of the third quarter or start of the fourth quarter, Chief Executive Officer Alan Jope said in a Bloomberg TV interview. 

“We’re very conscious that the consumer is feeling the pinch in many parts of the world,” he said.



When it comes to its own inflation management, Unilever is also facing “a truly unprecedented cost landscape,” according to Chief Financial Officer Graeme Pitkethly. The company is having to absorb an extra 4.6 billion euros (US$4.7 billion) of costs this fiscal year, and it can only offset part of that which is why it’s having to push up prices. 

Sales volumes are beginning to fall as some shoppers switch from branded goods to own-label products in a bid to make ends meet, said Pitkethly on a media call. In Europe, private label manufacturers have been gaining market share in food, ice-cream and household cleaning products as people economize, he said. In the US, Unilever’s ice cream division, which owns Ben & Jerry’s and Magnum, is facing significant pressure as people switch to cheaper brands. 

Britain’s biggest grocer Tesco Plc also recently said it was starting to see some early evidence of shoppers swapping some branded staples, such as pasta, for own-label products.  

While sales are holding up at Unilever, elsewhere consumers are reining in big-ticket spending. Walmart Inc. issued a surprise profit warning Monday saying US shoppers are spurning larger purchases and buying less profitable groceries. British home-improvement chain Wickes Group Plc slumped as much as 18 per cent on Tuesday after indicating that it too was finding that customers are taking longer to commit to big projects.

What Bloomberg Intelligence Says:

Unilever’s ability to raise price rises to protect margin while limiting volume erosion is stronger, boosting our optimism, while a split to five units from three and the addition of activist Nelson Peltz to the board in July raises focus on individual categories, and the ability to drive results.

-- Deborah Aitken, BI consumer-products analyst

Jope has been under pressure for months after a failed approach to buy Haleon Plc, the consumer unit spun out of drug company GSK Plc, last year. He also needs to show investors he has a plan for growth while contending with activist investor Nelson Peltz, who was appointed as a non-executive director in May and joined the board this month. 

In January, Jope announced plans to cut 15 per cent of senior managerial positions in a bid to speed decision-making and improve accountability. He has also reorganized the business with independent units for ice cream, beauty and personal care.

Unilever’s first half was “good,” according to RBC analyst James Edwardes Jones, adding that there was no indication that disruption from the management reorganization had found its way into the results.