Unilever and Carlsberg hike prices twice as fast as expected
Consumer giants including Unilever, Carlsberg and Pernod Ricard are walking a tightrope as they pass rising costs on to under-pressure shoppers
Unilever, Carlsberg and Pernod Ricard are increasing the pressure on consumers worldwide with higher prices for Dove soap, beer and Havana Club rum, raising the risk that shoppers may start to balk at spending more.
All three companies reported sales growth on Thursday at about double the pace analysts had expected. Unilever forecast full-year revenue growth at the top end of its forecast, though warned that profitability may suffer as consumers cut back on purchases.
Consumer-goods makers are walking a tightrope as the war in Ukraine worsens a surge in transport, packaging and raw material costs and simultaneously squeezes household budgets that are straining with higher energy prices. Their dilemma is that they need to raise prices, but if they do too much, consumers will switch to cheaper products.
Unilever forecast raw material cost inflation of €2.7bn in the second half, worsening from the first half. That contrasts with the assessment of European Central Bank vice-president Luis de Guindos, who said on Thursday that he thinks inflation has almost reached its peak and it will decline in the second half.
Unilever raised pricing 8.3%, while Carlsberg’s rose 13% due to a combination of more expensive beers and getting more sales from bars, where the margins are higher.
Unilever shares were little changed in London. Carlsberg gained 1.3% in Copenhagen. Pernod fell 1.1% in Paris after forecasting a slowdown in second-half earnings due to the war in Ukraine and lockdowns in China.
Unilever has so far covered about two-thirds of the cost increases it’s facing with price hikes, CFOGraeme Pitkethly said on a call with analysts.
The UK company is one of the few major European consumer-goods makers that’s already suffering a decline in shipments, even though the drop was less than expected in the first quarter. Nestlé has said it doesn’t yet see signs of shoppers switching to cheaper products, though that will probably start later in 2022, affecting volumes. The Swiss food giant started the year with its biggest increase in pricing in more than a decade. Danone said last week higher prices are just hitting the shelves in Europe and further increases may be necessary.
“There is more to do as we navigate our business through unprecedented cost inflation, but we are making good progress,” CEO Alan Jope said in the statement.
The sales reports echoed that of Procter & Gamble, which last week beat analysts’ expectations by raising prices.
Bloomberg News. More stories like this are available on bloomberg.com
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