Unilever tackles inflation dilemma: how much can be passed on to consumers?

Sandwiched between the desperate crypto advertisements and a tide of lazy pop culture nostalgia, consumer goods giant Unilever re-entered the Super Bowl fray on Sunday with a spot for Hellmann's Mayonnaise centred on the seemingly uncontroversial idea that people should not throw away the food they buy. They should "make taste, not waste".

Created by the agency Wunderman Thompson, the ad sees Hellman's taking its own advice, re-using the leftovers of a campaign message it debuted during last year's Super Bowl, on that occasion with comedian Amy Schumer's "Fairy Godmayo" in helpful menu suggestion mode.

In the new ad, innocently bin-hovering consumers are tackled to the ground by the inside linebackers coach of the New England Patriots, who yells at them to whip up potato salad or a frittata instead.

Now if the words “inside linebackers coach of the New England Patriots” mean nothing, the critical information here is that his name is Jerod Mayo.

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That’s right, a Mayo advertising mayo. If anything could make me feel fondly toward an insidious substance like mayonnaise, it is this.

Indeed, Saturday Night Live star Pete Davidson also appears in the ad, but regrettably his name does not double-up as a condiment, so his contribution is not as funny.

All this could have sounded like a corporate lecture delivered smack in the middle of a traditional US “food holiday”, when over-catering is an understandable error. But in common with the best of American advertising, the Mayo x Mayo ad is such a triumph of comic exaggeration, it renders any objections to it more laughable than the concept itself.

And yet Hellmann’s mission statements about tackling waste have not exactly passed without comment – the main source of criticism being a major shareholder in Unilever itself.

Mauritius-based fund manager Terry Smith has poured cold scorn on Unilever chief executive Alan Jope's declaration that "fighting against food waste – that is the purpose of Hellmann's", castigating him for a "ludicrous" need to bestow a higher purpose upon a mayonnaise.

“A company which feels it has to define the purpose of Hellmann’s mayonnaise has in our view clearly lost the plot,” wrote Smith in January.

Look, anything is better than accidentally revealing the true purpose of mayonnaise, which is obviously to make it easier for convenience food manufacturers to disguise the disappointing condition of their pre-packed sandwiches.

Marketing ambition

Hellmann’s, a 109-year-old brand that has the distinction of being the best-seller in its category, thinks it can do better, which is the sort of ambition people normally commend.

But then, for some old-school investors, it is not the thought that the stock they hold in vast quantities might be advancing warm-and-fuzzy lines that is the problem – it’s the thought that this warm-and-fuzziness might actually be real enough to come at a short-term cost to their own pocket that irks.

For Smith, the “make taste, not waste” idea is controversial. Unilever’s management, he claimed, is “obsessed with publicly displaying sustainability credentials at the expense of focusing on the fundamentals of the business”.

That the underlying cleverness of Hellmann’s marketing is that it has less to do with the stated food waste concerns and more to do with expanding perceptions of mayonnaise seems not to have occurred.

In any case, Unilever has greater problems than one sustainability sceptic. All manner of shareholders have been miffed lately at the London-based owner of Lyon’s, Knorr, Ben & Jerry’s, Persil, Dove and hundreds of other brands thanks to its inability to deliver returns at quite the same rate as rivals such as Nestlé and Procter & Gamble.

Unilever, which cut 1,500 jobs in January, warned last week that its operating margins would narrow throughout 2022 and it would take two years to get back to 2021 levels of profitability.

Although it has put up prices and expects to do so again, it signalled that it would not be able to pass on the full impact of inflation in its raw material costs. "We won't push pricing to a level where it compromises the long-term health of the business," said its chief financial officer Graeme Pitkethly.

This guidance on margins, described as “shocking” by one analyst and “a big worry” by another, prompted Unilever’s stock to fall further. It also highlighted the predicament faced by a broad spectrum of businesses at a time when inflation is ratcheting up to rates not seen in decades: how much of a price rise, if any, can a brand carry off before consumers stop buying it?

Marketers at much smaller and more fragile companies than Unilever must now contend with this question: how to sell when what you are selling is suddenly more expensive than it was yesterday.

Money’s worth

In this environment, ads that implore people to get their money’s worth – if you don’t want to hold the mayo, then please use all the mayo – will make even greater sense. And trying to limit perceptions of poor value will surely be a smarter strategy than just hoping consumers continually re-buy products they rarely fully use up.

Nobody looks to Super Bowl ads for gritty takes on the strains and tensions of modern life. At a reported $6.5 million for 30 seconds, that vibe has never been the ideal way to shift crisps. But that doesn’t mean the odd allusion to the current economic situation can’t be effective.

The good news for Unilever, exposed to the surging prices of several different types of oil from crude to palm to soybean, is that Generation Z influencers on TikTok and Instagram are, according to the New York Times, happily promoting its Vaseline petroleum jelly as a fashionable overnight skin hydration option.

Oil inflation notwithstanding, Vaseline remains cheaper than many of the fancier skincare products designed for that precise purpose.

I’d say some of us would rather put mayonnaise on our faces, but I wouldn’t want to give anyone any ideas.