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April 28, 2022

Unilever flags declining volumes as pricing actions kick in

CEO Alan Jope said Unilever is “in unchartered territory” when it comes to pricing and volumes.

By Andy Coyne

Consumer goods giant Unilever has said volumes are likely to dip this year as a result of pricing actions taken on its products amid volatile commodity markets.

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Unilever product advertising is mainly through mainstream TV channels. Out of the products advertised so far at least 50% (over 850) of ads have been run on TV, while print media comes second with 496 ads. Unilever also utilizes social media platforms for advertisement. Unilever products are categorized by innovation ratings and tags in our product launch database. The North American region consists of almost 74 products with innovations related to the formulation of the product. Europe and other regions also have more products categorized under formulation-related innovation, followed by the packaging and positioning of the products. Most Unilever products are tagged with “High Vitamins”, “Recyclable”, and “Natural” tags to understand what the product differentiator is from other products available in the market. The majority of products belong to the personal care industry with a total of 5,788 products to date. This report, through the Unilever Example, illustrates how GlobalData Explorer enables you to:  
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In a call with analysts following the release of its first-quarter sales today (28 August), the Marmite and Hellmann’s owner said it is expecting low single-digit volume declines this year.

CEO Alan Jope said: “I would characterise this as a manageable volume decline.”

However, Jope also said Unilever is “in unchartered territory” when it comes to pricing and volumes.

The company recorded underlying sales growth of 7.3% to EUR13.8bn (US$14.51bn) in the quarter, on a year-on-year basis. Jope said the result was driven by strong pricing.

“This performance was delivered against the backdrop of significant rises in input costs that have further accelerated through the first three months of the year, and the human tragedy of the war in Ukraine,” he said.

Unilever expects input cost inflation of around EUR2.1bn in the first half of the year but it has raised its cost forecast for the second half of 2022. It expects input cost inflation for the second six months of 2022 to be around EUR2.7bn.

As a result, the Magnum ice-cream maker expects to make further moves on prices.

“This period of unprecedented inflation requires us to take further pricing action with some impact on volume as a result. We now expect underlying sales growth in 2022 to be towards the top end of the previously guided range of 4.5% to 6.5%,” the company said in commentary surrounding its results.

“We expect underlying operating margin for the first half to be within our guided 2022 range of 16-17%. As a result of the forecast increase in costs in the second half, we currently expect the full year underlying operating margin to be at the bottom end of that range.”

CFO Graeme Pitkethly told analysts: “We have to continue to move forward with pricing.

“We will have to get the balance right with demand elasticity.”

Jope added: “So far elasticity has been lower than we anticipated. Some 20% [of our products] are in the value segment, which gives some protection against downtrading.”

The soap-to-ice cream company’s foods and refreshment division recorded underlying sales growth of 6.5%.

Commenting on the results, Martin Deboo, an equity analyst with Jefferies, said: “We read this as a positive update given extreme bearish sentiment and low relative valuation.”

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Free Report
img

Unilever- A Deep-dive into Product Launches and Advertising Strategy

Unilever product advertising is mainly through mainstream TV channels. Out of the products advertised so far at least 50% (over 850) of ads have been run on TV, while print media comes second with 496 ads. Unilever also utilizes social media platforms for advertisement. Unilever products are categorized by innovation ratings and tags in our product launch database. The North American region consists of almost 74 products with innovations related to the formulation of the product. Europe and other regions also have more products categorized under formulation-related innovation, followed by the packaging and positioning of the products. Most Unilever products are tagged with “High Vitamins”, “Recyclable”, and “Natural” tags to understand what the product differentiator is from other products available in the market. The majority of products belong to the personal care industry with a total of 5,788 products to date. This report, through the Unilever Example, illustrates how GlobalData Explorer enables you to:  
  • Track product launches by FMCG companies to get an understanding of the product-level strategies including geographic concentrations, innovation types, product claim, category focus and more
  • Monitoring the advertising strategies of various brands and gain insights into channel focus, regional focus, and more
  • Perform company-level analysis to understand business model, size, and geographic focus
Don’t miss out on key market insights that can help optimize your next investment – read the report now.
by GlobalData
Enter your details here to receive your free Report.

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