Quantcast
Menu
Save, make, understand money

Household Bills

Unilever warns that more price rises could be on the way

Emma Lunn
Written By:
Emma Lunn
Posted:
Updated:
10/02/2022

The consumer goods company, which is behind brands such as Dove and Marmite, warned that the cost of food, health, hygeine and beauty products could go up as its business costs increase.

In its annuals results, Unilever reported its fastest underlying sales growth in nine years of 4.5%, with increases of 2.9% in price and 1.6% in volume. Underlying operating profit increased 2.9% but underlying operating margin decreased by 10bps.

The company, which sells popular products such as Ben & Jerry’s, Magnum and Hellmann’s, raised prices in 2021 but said in its annual results that some products would get more expensive as it faced extra costs of £3bn.

UK firms are being hit with higher commodity, freight, energy and packaging cost, which are being passed on to customers by numerous companies. Food price inflation is a key area of concern, while Pret a Manger recently blamed rising costs for an increase in the cost of its coffee subscription.

Alan Jope, Unilever CEO, said the major challenge of 2021 had been the “dramatic rise of input costs” and said the company was “focused on driving faster growth from our strong portfolio of brands and markets”. He added that in 2022, Unilever will need to “manage a significant input cost inflation cycle”.

Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, said: “Inflation is flashing as a big warning light in these results and the worst may be yet to come. Despite the fastest underlying sales growth in nine years, coming in at 4.5%, the fall in the underlying operating margin is already painful.

“Input costs are rising dramatically and prices are being pushed up as result by 4.9% in the fourth quarter. With belts being tightened as the cost of living squeeze intensifies some customers won’t put up with increased prices indefinitely and may switch to cheaper alternatives. However, the strength of brands like Dove and Ben and Jerry’s should provide some resilience.

Russ Mould, investment director at AJ Bell, said: “The company says underlying sales growth is at a nine-year high, it has successfully sold the non-core tea business, there are more share buybacks, and – perhaps most interesting – there are promises not to chase big deals for now.

“But are these results really cause for celebration? First, a big chunk of its sales growth has come from putting up prices which every product manufacturer seems to be doing. Volume growth paints a different story with a mere 1.6% gain – that’s not good when you consider Unilever is meant to own some of the world’s most prized brands. Are these names less relevant to shoppers in a world with increased choice?”