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AlwaysFree: Unilever Sees Consumer Backlash Worsening On Inflation

Author: SSESSMENTS

  • Dove soap maker forecasts drop in volumes in first half
  • Unilever had weakest margin in at least seven years in 2022

According to Bloomberg article published on February 9, 2023, Unilever Plc said that consumers may buy fewer of its products this year as shoppers balk at price increases on items like Dove soap and Hellmann’s mayonnaise.

Sales growth will probably weaken this year from last year’s 9% pace, the company forecast Thursday. Unilever also reported its weakest operating margin in at least seven years.

The maker of Ben & Jerry’s ice cream will keep raising prices because it has only passed off three-quarters of its higher costs onto consumers, Chief Executive Officer Alan Jope said in a Bloomberg TV interview. Raw material inflation will be about €1.5 billion ($1.6 billion) in the first half, and a lower amount in the second, Unilever predicts.

“We are now probably past peak inflation, but we’re not yet at peak prices,” he said.

Hein Schumacher, set to replace Jope in July, will be under pressure to boost growth and make the company more efficient. Unilever’s shares have lagged behind those of Nestle SA and Procter & Gamble Co., and activist Nelson Peltz last year joined the board to push for better performance at the stock-cube to deodorant conglomerate. 

The shares were little changed after the company forecast modest improvement in its 2023 operating margin. Unilever predicts raw material costs will decline in the second half. 

What Bloomberg Intelligence Says:

“Unilever’s 2023 adjusted margin will struggle to meet consensus with downgrades due after its warning of extended price inflation on 1H costs (about €1.5 billion), limited volume erosion and only a modest improvement in this year’s underlying operating margin. That means estimates of 90-bp expansion to 17% look optimistic. Organic sales growth could nevertheless reach the top of the 3-5% guidance range. Overall, 2022 results met lowered targets and expectations. A third tranche of the share-buyback plan hasn’t been announced.” Deborah Aitken, BI consumer-products analyst

Sales volumes dropped 3.6% in the fourth quarter, more than double the rate of the first nine months of 2022. The company said it expects a continued decline in the first half and it’s too early to predict if they might recover in the second. 

Pricing rose 11% last year. The company said price growth will remain high in the first half and that later it will soften, which may lead to an improvement in demand. 

Unilever forecast full-year sales growth will be at least in the top half of a 3% to 5% range.

Tags: All Markets,All Products,AlwaysFree,English,World

Published on February 10, 2023 2:20 PM (GMT+8)
Last Updated on February 10, 2023 2:20 PM (GMT+8)