Prices of popular brands have jumped – and the worst is yet to come
The maker of a host of well known consumer brands has revealed a big lift in prices and warned of worse to come as it battles “unprecedented cost inflation” around the world.
Unilever, which produces foods such as Marmite, Cornetto ice creams and Hellmann’s mayonnaise alongside goods including Dove soap, said it had raised prices by 4.1% in its third quarter and expected price pressures to intensify even further next year.
Its chief financial officer did not rule out further hikes in the months ahead but said it was treading carefully to avoid damaging the health of the business – its competitiveness.
The firm explained it had taken action to ensure its full-year operating margin remained on target at flat on the previous year.
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‘Consumers are really going to feel the pinch’
Consumer goods companies face soaring prices for raw materials such as energy, edible oils and packaging, as well as higher transport costs as economies recover from the COVID-19 pandemic.
It is up to the likes of supermarkets whether they pass on those costs on to their customers and the most recent evidence shows grocery inflation starting to pick up pace at a time when other household essentials, especially energy, are shooting up.
Underlying sales rose 2.5% in the three months to 30 Sept, Unilever reported, aided by strong demand in the United States, India, China and Turkey.
The performance has echoes with that of rival Nestle which raised its full-year sales target on Wednesday as it also hiked prices to cope with extra costs.
Unilever said “pricing actions are being taken in countries across Europe”.
It said underlying sales in the UK declined slightly over the quarter compared to the same period last year.
Alan Jope told shareholders the company was acting to shield itself from cost inflation
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Chief executive Alan Jope told investors: “We have delivered a good quarter against strong comparators, with underlying sales growth of 2.5%.
“The combination of our strategic choices and focus on operational excellence continue to drive competitive growth.”
Unilever shares, down 13% in the year to date, were 3% higher in morning trading.
Freetrade’s senior analyst, Dan Lane, said of the price picture painted by the company: “The reality is COVID is going to leave a very tricky path ahead for Unilever though.
“The prices of raw materials, packaging and distribution are soaring and there’s only so much of that extra cost it can add to a tub of Marmite before consumers skip the spread altogether.”
OpenAI has signed its first major licensing deal to bring well-known characters to life on its Sora video generation tool.
The company said the agreement with Walt Disney was part of a push to ensure the rights of creators in the generative artificial intelligence (AI) space amid growing concerns over copyright, fakes and misinformation.
It forms part of a $1bn Disney investment in OpenAI, that will see the entertainment firm roll out ChatGPT to its staff and grow its AI capabilities.
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The initial three-year licensing deal will allow Sora users to generate and share videos based on more than 200 Disney, Marvel, Pixar and Star Wars characters.
These include Mickey Mouse, Cinderella and Luke Skywalker.
Sora allows people to quickly create realistic clips based merely on text prompts.
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Disney and OpenAI said they were committed to responsible use of AI amid the backlash from critics who have pointed to widespread misuse of generative AI in the social media space – a practice known as AI slop.
Some have depicted fake messages from celebrities and even used the dead.
OpenAI CEO Sam Altman said: “This agreement shows how AI companies and creative leaders can work together responsibly to promote innovation that benefits society, respect the importance of creativity, and help works reach vast new audiences.
His counterpart at Disney, Bob Iger, added that the partnership would “extend the reach of our storytelling through generative AI, while respecting and protecting creators and their works”.
As part of the deal, some user-generated Sora videos will be made available on the Disney+ streaming service.
Dan Coatsworth, head of markets at AJ Bell, said of the tie-up: “It’s a win-win situation for Disney and OpenAI. Disney gets to deploy its beloved brands in the world of AI while keeping control of the intellectual property.
“Fans can use Disney characters to make videos and take social media content to another level. That could drive significant traffic to OpenAI’s Sora social media platform, turning a relatively unknown entity into a household name in a flash.
“As part owner of the business, Disney will be able to use the equity stake in OpenAI to ensure its characters are used in a controlled environment.
“It’s a significant step forward for the concept of fan fiction”, he concluded.
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