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April 29, 2021updated 11 May 2021 5:27pm

Unilever experiencing worst inflation in almost ten years

By Simon Harvey

Unilever is the latest global consumer packaged goods firm to reveal pricing actions to offset the rising cost of commodities as the finance chief for the ice cream-to-condiments maker said inflation levels are the worst it has seen in “about a decade”.

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The average UK consumer is experiencing a severe cost-of living crisis as inflation surges to a forty-year high and the price of goods continues to rise. This shock is the result of the sharply increasing costs of commodities, energy, and the ongoing conflict in Ukraine, and is threatening FMCG manufacturers, retailers, and foodservice operators’ ability to survive and grow. Inflation will have a profound effect on many consumer-facing industries in 2022 and beyond. Consult GlobalData’s new whitepaper, Inflation in the UK: The Impact of Historically High Inflation on the UK Consumer Landscape, to better understand shifts in consumer behavior and their impact on spending patterns, as well as the implications for UK businesses. This whitepaper covers:  
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  • What is the current inflation situation in the UK?
  • What impact is inflation having on UK retail sales?
  • What tactics are businesses relying on to tackle the effects of high inflation?
  • How are consumers changing their behaviors to cope with the higher cost of living?
  • Which industry sectors are most vulnerable to reduced consumer demand?
  • How is the government responding to high inflation?
  • How long will high inflation last in the UK?
  • How can your company survive and thrive in a high inflation environment?
Enter your details here to receive your free whitepaper and ready your business for these increasingly uncertain times.
by GD50 Custom
Enter your details here to receive your free Whitepaper.

Addressing analysts today (29 April) after reporting first-quarter results, CFO Graeme Pitkethly said Unilever has “been very active already in stepping up pricing – you saw pricing of 1% in Q1 and we do expect to increase that further from here. The business is very focused, market by market, on recovering those commodity costs.”

Pitkethly laid out a forecast for low double-digit inflation through the first half of its financial year and expects an acceleration to “low-to-mid-teens” in the back half. “The commodity inflation that we are seeing is impacting all businesses,” he said, referring to its three divisions of food and refreshment, beauty and personal care, and home care.

Splitting the 1% price increases across the group by region, Asia, Africa, the Middle East, Turkey and Russia – all one reporting division for Unilever – saw a rise of 1.2% and the Americas 2.5%. However, prices in Europe went down by 1.6%.

On the same call, CEO Alan Jope said: “We’ve seen our ability so far to land inflation and continue the improvement of our competitiveness. It’s much easier for us to land pricing in emerging-market trade structures than in the developed markets – Europe is particularly difficult.

“When we see inflation, our first reflex is to look at cost and mix with pricing as a last resort, given how competitive our markets are. But so far so good. Latin America is our lead example where we’ve been very aggressive on pricing because of the double effect of commodities and currencies.”

A week ago, Nestlé, the world’s largest food manufacturer, warned inflation, driven by commodity, packaging and transport costs, is likely to spill over into next year.

Nestlé CEO Mark Schneider said: “From what we can see now, inflation is very much a 2021 and, to some aspect, also a 2022 phenomenon. This is a very volatile environment right now with very low visibility, lots of surprises happening, and again, we will take pricing action, and we have taken some pricing actions already.”

For the first quarter, Unilever reported a turnover of EUR12.3bn (US$14.9bn), which was down 0.9%, driven by a negative currency impact of 8%. Underlying sales growth rose 5.7%, with volumes up 4.7%.

“We are confident that we will deliver underlying sales growth in 2021 within our multi-year framework of 3-5%, with the first half around the top of this range,” CEO Jope noted in the results commentary. “We expect to increase underlying operating margin slightly for the full year, though with a decline in the first half driven by Covid-19 impacts, higher cost inflation and increased marketing spend over the prior year.”

CFO Pitkethly told analysts Unilever will “try to drive our savings programmes hard in order to offset inflation”, adding “we are confident we have the toolkit and the ability to navigate higher inflation through dynamic pricing actions and cost savings”.

He continued: “We are seeing levels of inflation that we haven’t seen in about a decade and we’ve stepped up pricing in the first quarter. We will continue to take price action in countries and categories where we see that inflation, while always taking the needs of the local consumer into account.”

Related Companies

Free Whitepaper
img

What is the impact of historically high inflation on the UK consumer landscape?

The average UK consumer is experiencing a severe cost-of living crisis as inflation surges to a forty-year high and the price of goods continues to rise. This shock is the result of the sharply increasing costs of commodities, energy, and the ongoing conflict in Ukraine, and is threatening FMCG manufacturers, retailers, and foodservice operators’ ability to survive and grow. Inflation will have a profound effect on many consumer-facing industries in 2022 and beyond. Consult GlobalData’s new whitepaper, Inflation in the UK: The Impact of Historically High Inflation on the UK Consumer Landscape, to better understand shifts in consumer behavior and their impact on spending patterns, as well as the implications for UK businesses. This whitepaper covers:  
  • Why has global inflation returned with a vengeance?
  • What is the current inflation situation in the UK?
  • What impact is inflation having on UK retail sales?
  • What tactics are businesses relying on to tackle the effects of high inflation?
  • How are consumers changing their behaviors to cope with the higher cost of living?
  • Which industry sectors are most vulnerable to reduced consumer demand?
  • How is the government responding to high inflation?
  • How long will high inflation last in the UK?
  • How can your company survive and thrive in a high inflation environment?
Enter your details here to receive your free whitepaper and ready your business for these increasingly uncertain times.
by GD50 Custom
Enter your details here to receive your free Whitepaper.

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