Unilever, which today (8 May) booked rising first-quarter profits, has told just-food that it is tackling rising costs with a two-pronged strategy.
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Excluding one-off gains, profits at the Anglo-Dutch consumer goods giant rose 2.4% in the quarter to EUR1.4bn (US$2.2bn).
The rise in earnings was achieved despite a 4.2%, or EUR400m, rise in commodity costs.
“There are a number of things we do to mitigate rising costs,” a Unilever spokesperson said this morning. “We generate savings of our own to offset higher costs and negotiate increased selling prices.”
In recent months, Unilever has streamlined its operations and cut jobs in the US, the UK, France and the Benelux countries under its “One Unilever” programme.
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By GlobalDataThe moves have been designed to improve efficiency and boost margins. During the first quarter of this year, Unilever booked an underlying improvement in its operating margin of 30 basis points.
Unilever said new technologies and reformulations, which allowed the company to reduce its use of expensive ingredients or switch to cheaper ingredients, had also helped margins.
Passing on higher commodity costs in the form of higher prices was also key, the Unilever spokesperson said.
“Our ability to increase prices shows the benefit of having a strong portfolio of powerful brands,” the spokesperson said. “This was coupled with a compelling and rational argument that we presented to retailers.”
While sales volumes were slightly down in Europe, Unilever said that it did not believe this was a consequence of price hikes.
“If you look at the market, price rises have not had a great impact on volumes. Europe has long been one of our slowest growing regions,” the spokesperson added.
