As of today, Unilever Expects Price Hikes to Continue Through H2 of this Year

In addition to continuing to raise prices for its detergents, soaps, and packaged foods to offset rising input costs, Unilever Plc said on Thursday that the increases will be eased slightly in the second half of 2023, as a result of reducing input costs.

Based in London, the company that manufactures products such as Fairy washing-up liquid, Dove soaps, Marmite savory spread, and Ben & Jerry's ice cream, is forecasting that costs will rise in 2023. It anticipates net material inflation in the first half of 2023 to be around 1.5 billion euros ($1.6 billion). 

As a result of the surging costs of cocoa, sunflower oil, wheat, sugar, and many other commodities over the past year, the packaged goods industry has increased prices dramatically. As a result of the Russian invasion of Ukraine in February 2014, energy prices soared even higher, further boosting concerns about the supply chain and raw material costs faced by the industry during the Covid era.

A strong performance from its big brands led to the fastest growth of over a decade, according to Trade Algo.

He said the company is very aware that consumers are squeezed, and it wants to minimize price increases to remain competitive in 2023. At this point, inflation has passed its peak, but pricing has not reached its peak yet... some further modest price increases are likely.”

In spite of that, he said there were no clear projections for the second half of the year for the company.

According to finance chief Graeme Pitkethly, we're only covering about 75% of the cost inflation thus far. As far as repairing our gross margin is concerned, we need to get that number above 100%.

This was the fourth quarter when underlying price growth was a record 13.3%, but underlying volumes fell by 3.6% for the quarter.

As the cost of energy and other raw materials has begun to ease, some companies have indicated that they may reduce the price hikes that they implemented in the recent past, which could be of some relief to consumers.

There has been a lot of drama surrounding Unilever over the past year. Incidents such as three rejected bids to acquire GSK's consumer health business, activist Nelson Peltz joining its board, and Jope announcing his departure are just a few examples.

There has an announcement that the company is going to have new CEO Hein Schumacher at the end of last month.

Tineke Frikkee, a fund manager at Waverton Investment Management, says she hopes the new CEO will start as input costs ease, allowing the company to gain back market share as input costs reduce.

There was a 9.2% rise in Unilever's underlying sales in the fourth quarter, a higher figure than the 8.2% increase that was expected by analysts based on the company's data.

In the first half of the year, we expect the underlying operating margin to decline by 230 basis points to 16.1%, and to remain around that level in the second half.

In Waverton's Frikkee's view, some observers may have hoped for a margin improvement in the full-year results. I would like to point out that any improvement in margins will be weighed toward the second half. In this area, we may see some downgrades." We may see some downgrades in this area."