Unilever boosts sales goal as it imposes biggest price hike in its history

Unilever raised its sales forecast for this year after pushing through the biggest increase in prices in its history amid rampant inflation.

The maker of Knorr stock cubes now expects sales this fiscal year to increase more than 8 per cent, up from a prior range of 4.5 per cent to 6.5 per cent, after reporting a better than expected third quarter. However, the group said volumes are falling in a sign that cash-strapped shoppers are starting to cut back on essential spending.

Unilever’s stock rose slightly in early trading in London.

The Anglo-Dutch group said it ramped up prices by 12.5 per cent during the period, the biggest increase on record and the seventh consecutive quarter of higher prices. However, consumers are starting to take strain and Unilever sold fewer items with its volume falling and further declines are expected during the final quarter as consumers trade down to cheaper supermarket brands.

Unilever, whose chief executive Alan Jope will step down next year, said the global macroeconomic outlook remained mixed and it expected high inflation to persist in 2023.

Nestle SA, the world’s biggest food retailer, also said last week that inflation will remain an issue next year and shoppers should brace for more price increases. Mark Schneider, chief executive of the maker of Nescafe and Maggi stock cubes, said consumer goods companies are facing huge upward pressure on energy, transportation costs and commodities.

The Swiss maker reported a small drop in the volume of goods it sold in the third quarter too after raising prices 9.5 per cent.

Beer maker Carlsberg earlier this week also flagged that very high inflation is starting to hit consumer demand and said it could have to raise prices further to counter higher costs.

Unilever’s price rises this year were lower than cost price inflation, chief financial officer Graeme Pitkethly said on a call with journalists, which is why operating margin will fall to 16 per cent this year. Still, it expects the margin to grow in 2023 and 2024, through pricing, reducing the size of pack sizes, and cost cutting.

Inflation is surging globally, with the rate in the euro-area hitting a record 10% in September. In the US, Unilever’s biggest market, inflation accelerated to a fresh 40-year high in September. - Bloomberg