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.”
Business
Donald Trump tells UK to ‘get rid of windmills’ and says raising windfall tax on North Sea oil is ‘big mistake’
Donald Trump has said the UK is making “a very big mistake” in its fossil fuel policy – and should “get rid of windmills”.
In a post on Friday on his social media platform, Truth Social, Mr Trump shared news from November of a US oil producer pulling out of the North Sea, a major oil-producing region off the Scottish coast.
“The UK is making a very big mistake. Open up the North Sea. Get rid of windmills!”, the US president-elect wrote.
The Texan oil producer Apache said at the time it was withdrawing from the North Sea by 2029 in part due to the increase in windfall tax on fossil fuel producers.
North Sea oil rig. Pic: Reuters
The head of Apache’s parent company APA Corporation said in early November it had concluded the investment required to comply with UK regulations, “coupled with the onerous financial impact of the energy profits levy [windfall tax] makes production of hydrocarbons beyond the year 2029 uneconomic”.
Chief executive John Christmann added that “substantial investment” will be necessary to comply with regulatory requirements.
Mr Trump used a three-word campaign pledge “drill, baby, drill” during his successful election campaign, claiming he will increase oil and gas production during his second administration.
In the October budget announcement, UK Chancellor Rachel Reeves raised the windfall tax levied on profits of energy producers to 38%.
Called the energy price levy, it is a rise from the 25% introduced by Rishi Sunak in 2022 as energy prices soared following Russia’s invasion of Ukraine.
Many oil and gas businesses reported record profits in the wake of the price hike.
The tax was intended to support households struggling with high gas and electricity bills amid a broader cost of living crisis.
Apache is just one of a glut of firms that made decisions to alter their North Sea extraction due to the Labour policy.
Read more
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Even before the new government was elected, three companies, Jersey Oil and Gas, Serica Energy and Neo Energy – announced they were delaying, by a year, the planned start of production at the Buchan oilfield 120 miles to the north-east of Aberdeen.
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