Unilever pushed up its prices by 12.5 per cent in the third quarter of the year from a year earlier, its highest-ever quarterly increase, becoming the latest consumer goods maker to push steep inflation through to customers.
But the maker of Magnum ice cream, Cif cleaning products and Dove soap also warned of declining sales volumes as inflation-squeezed consumers economise on household essentials.
The company said on Thursday that sales volumes had declined 1.6 per cent during the quarter and warned of “more negative underlying volume growth” in the final three months of the year.
Unilever’s announcement comes after rival consumer goods groups such as Nestlé also reported steeper price rises than expected while recording a dent in sales volumes as households, particularly in Europe, grapple with the rise in costs.
Pointing to a “mixed” outlook for the global economy, chief executive Alan Jope said: “We expect the challenges of high inflation to persist in 2023. The delivery of consistent growth remains our first priority.”
Graeme Pitkethly, chief financial officer, said consumers in Europe were particularly affected by inflation in basic goods and energy resulting from the war in Ukraine. “Consumer sentiment in Europe is at an all-time low,” he added.
Dutch brewer Heineken said on Wednesday that European consumers were cutting back their drinking budgets, warning of “early signs of demand slowdown” in the region.
Unilever achieved higher price growth than analysts had expected, with a narrower volume decline, enabling it to push up its full-year forecast for underlying sales growth to above 8 per cent. A strong dollar helped the group record its highest turnover to date, at €15.8bn for the quarter.
However, Pitkethly said the group had not passed on all the inflation it faced in input costs, which meant it expected its full-year margin to decline 2.4 percentage points to 16 per cent.
He said Unilever expected another €1bn of net materials inflation in the first half of 2023, following €4.5bn of additional costs in 2022.
Analysts said the latest numbers suggested a management reorganisation at Unilever, dividing it into five business groups, was proving effective.
Alicia Forry, at Investec, said: “Importantly, underlying volume growth improved in four of the five business groups . . . despite more pricing being taken, which suggests the strength of the businesses is improving following the reorganisation of the operations which completed over the summer.”
Unilever has faced a turbulent year following investor discontent over a failed bid for the consumer health division of GSK, with Jope announcing he would retire at the end of 2023 and activist investor Nelson Peltz joining its board.
Rival foodmaker Nestlé reported price increases of 7.5 per cent in the first three quarters of the year, its biggest rise in decades, while its real internal growth — a measure of sales volumes and consumers’ product choices — slid 0.2 per cent in the third quarter.
Household products maker Reckitt Benckiser said this week it had increased prices by almost 10 per cent in the quarter, but reported a 4.6 per cent drop in sales volumes.