Unilever increases prices to combat cost of living crunch

As the cost of living continues to rise, shoppers are turning away from Unilever brands of ice-creams, condiments, and bleaches. They prefer supermarkets own-brand products.

Unilever acknowledged that only a third (of the brands) of consumer goods giants such as Ben & Jerry’s Hellmann’s or Domestos grew their share of market last year.

The FTSE 100 firm said that “this poor performance reflects the loss of share to private label in Europe and consumer shifts towards super-premium segments where we are currently under-indexed in North America, as well as a reduction in unprofitable products globally.” “Our competitiveness does not meet our expectations and we are working quickly to improve it.”

Unilever, founded in 1929, owns many of the most famous brands around, such as Colman’s Cola, Lipton Persil, and Marmite. In recent years, it has been criticized for its continued operations in Russia as well as for Ben & Jerry’s stance regarding the Israeli-Palestinian Conflict.

The sales of the group for the twelve months ending December 2023 were €59.6 billion. (£50.9billion), which is a 0.8% decrease from 2022.

After removing the currency fluctuations, the group achieved a sales growth of 7% last year. However, this was almost exclusively due to raising prices and not selling more products to customers. Bruno Monteyne is a Bernstein consumer goods analyst. He asked, “Why are customers abandoning them more and more?”

Hein Schumacher Unilever CEO said that “competitiveness is still disappointing and overall performance must improve.”

Unilever’s volume growth was 0.2 percent, but it was the first time in two years that Unilever had increased its volumes. Unilever’s price hikes were a major factor in driving sales. Unilever increased prices across all brands on average by 6.8 percent last year.

Magnums and Cornettos were among the ice creams that saw a drop of 6 percent in sales last year, compared to 2022. Unilever attributed the decline to a wetter summer in Europe, and consumers switching from “value formats” to cheaper alternatives. However, price increases averaging 8.8 percent meant that underlying sales were positive.

The company’s nutrition brands such as Knorr stockcubes, Hellmann’s Mayonnaise and Domestos Bleach, as well as its homecare products, including Surf laundry detergents, suffered from volume declines, but were saved by price increases.

Unilever’s Beauty and Well-being division was the standout division in Unilever last year. It recorded a underlying sales increase of 8.3%, split evenly between volume and price increases. Vaseline is among the top performers and will reach €1 billion in turnover by 2023.

Unilever’s personal care brands, including Dove and Axe, also saw volume growth in 2017.

The group’s profit before tax declined to €9.34billion in 2023. This is down 10% from the €10.34billion it achieved in the year prior, when Unilever had a boost of €10,34billion from the sale its tea business which included PG Tips.

The underlying operating profit margin increased 60 basis points, to 16.7 percent, after removing the impact of special items.

Hein Schumacher said Unilever’s “competitiveness is still disappointing, and the overall performance must improve”. There will be more price increases in the coming year, as there is still “some” inflation, even though it is decreasing.

Unilever anticipates a sales growth of between 3 and 5% this year “with more equilibrium between volume and prices”. Expected to increase again is the margin.

Schumacher denies accusations of price gouging based on the company’s margins. He said that because the company chose not to pass on all costs, its gross margin was still lower than it had been before the pandemic.

In March, a quarterly dividend of 42.68cents per share is to be paid. Unilever announced a €1.5 billion new share buyback program to start in the second quarter along with its results. This helped push shares up by 134p or 3.4% to £40.34, giving the group an estimated stock market value of £100 billion.