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Unilever’s second-quarter sales have undershot forecasts as the consumer goods group battled to lure back inflation-hit consumers with lower prices.
Consumer goods groups such as Unilever and Nestlé are struggling to build back sales volumes following a long-running cost of living crisis, and heavily leaning on discounting and promotions to boost sales.
Underlying sales growth at Unilever grew 3.9 per cent compared with an expected 4.2 per cent uplift. The maker of Magnum ice cream and Dove soap raised prices by only 1 per cent in the second quarter, well below a consensus estimate of 1.6 per cent.
Nestlé, which also reported its earnings on Thursday, downgraded its full-year sales outlook after pricing “came down faster than expected”. The company put through price increases of 2 per cent in the first half of the year, well below the expected 3 per cent.
Unilever is undergoing a major turnaround to boost growth, including the separation of its ice cream business by the end of next year and significant job cuts. Unilever plans to cut about a third of all office roles in Europe by the end of next year.
“We continue to embed the growth action plan, doing fewer things, better and with greater impact,” said chief executive Hein Schumacher, adding that the productivity programme and separation of its ice cream unit announced earlier this year was “progressing at pace”.
“There is much to do, but we remain focused on transforming Unilever into a consistently higher-performing business,” he said.
The group maintained its sales growth outlook of 3 to 5 per cent for the year, driven by growing sales volumes. The company expects its underlying operating margin to be at least 18 per cent for the year, well ahead of expectations.
The conflict in Gaza has also weighed on Unilever’s sales. Consumers in Indonesia, where majority of the population is Muslim, fell 7 per cent in the second quarter. Indonesia makes up about 4 per cent of group sales.
“Some consumers avoided the brands of multinational companies in response to the geopolitical situation in the Middle East,” Unilever said.
China consumer confidence also hit sales, which fell in the mid single digits, the company said.