Unilever has warned that prices for consumer goods will rise further after posting record price increases last quarter that cut into demand for its products among cash-strapped shoppers.
The maker of Knorr stock cubes, Ben & Jerry’s ice cream and Domestos bleach raised prices 13.3 per cent in the final three months of 2022 and said they would continue rising as it faced pressure on margins and costs.
That is set to heighten pressure on households despite easing inflation rates — and in some cases price declines among input costs such as raw materials and energy.
“We think we are probably past peak inflation but not past peak pricing,” said Graeme Pitkethly, chief financial officer.
The UK-based consumer goods group on Thursday recorded underlying sales growth of 9 per cent in 2022, higher than analysts had expected, as price increases of 11.3 per cent during the year caused sales volumes to drop by 2.1 per cent.
The volume declines, which accelerated to a 3.6 per cent drop in the fourth quarter, will add to pressure on incoming chief executive Hein Schumacher, who takes the helm in July, to boost growth after a period in which Unilever’s share price has trailed behind rivals such as Nestlé and Procter & Gamble.
Unilever lowered its forecast for cost inflation for the first half of 2023, however, from €2bn to €1.5bn and said rises in input costs would be “significantly lower” in the second half. Shares in the group rose 0.4 per cent to £41.17 in early trading.
The Russian invasion of Ukraine led to spikes in energy and commodity costs last year. While some raw materials, such as wheat, have returned to pre-invasion prices, Pitkethly said overall costs to Unilever had continued rising as hedging mechanisms ran out and several currencies weakened against the dollar.
“We do remain very, very mindful of the pressures on consumers, and we chose not to fully offset the cost inflation through pricing,” he said.
He predicted a recovery in sales volumes as inflation eased in 2023: “As a consequence of the moderation in the level of price increases throughout the year, we think we will see an improved volume performance.”
While increasing prices, the group also took a hit to profitability in 2022, with its underlying operating margin declining 230 basis points to 16.1 per cent. It pushed up brand and marketing investment by €500mn as the squeeze on consumers’ wallets caused tougher competition between brands.
Net profit rose 24.9 per cent to €8.3bn on turnover of €60.1bn, up 14.5 per cent from a year earlier.
The results represent a final set of full-year figures for chief executive Alan Jope before Schumacher, recruited from Dutch dairy co-operative Royal FrieslandCampina, takes over
He was appointed following the arrival of activist investor Nelson Peltz on Unilever’s board after a period of lacklustre share price performance and a series of missteps, such as an ill-fated $50bn bid for GSK’s consumer health division, since spun off as Haleon.