Unilever PLC has accelerated price increases to the highest rate in years, offsetting rising raw material costs and a decline in shipments in Southeast Asia due to COVID-19 outbreaks.
The maker of Lifebuoy soap and Oxo beef stock said it increased pricing by 4.1 percent in the third quarter, the fastest in at least seven years. That offset an unexpected decline in shipments.
Rivals, ranging from Procter & Gamble Co to Nestle SA and Danone SA, have all warned of strained supply chains and soaring material costs. The risk is that price increases might lead consumers to switch to cheaper products from rivals.
Unilever chief executive officer Alan Jope forecast at least another 12 months of inflationary pressure.
“Our current view of the future is that peak inflation will be in the first half of 2022, and it will moderate as we move toward the second half,” Jope told Bloomberg Television in an interview.
“We continue to responsibly take pricing, and that’s in relation to the very high levels of inflation we’re seeing,” Unilever chief financial officer Graeme Pitkethly said.
Inflation in the consumer goods industry is in the “high teens” overall, with Unilever seeing effects slightly below those levels due to its negotiating power, he said.
Inflation could be worse next year and the company might have to deal with spot pricing as its hedges expire, Pitkethly said.
About 20 billion euros (US$23.3 billion) of annual raw materials and packaging costs, and 3 billion euros of annual logistics costs have been affected by inflation, Pitkethly said.
Unilever is affected by higher prices for materials such as palm oil, soybean oil and crude oil derivatives including resin, as well as shipping costs.
SOUTHEAST ASIA CRUNCH
Overall sales rose 2.5 percent on an underlying basis in the third quarter, but a steep decline in demand in important markets in Southeast Asia offset stronger performances in the US, China and India.
Southeast Asia was responsible for two-thirds of the 1.5 percent decline in third-quarter volume, Pitkethly said.
The company’s shares have dropped 9.8 percent this year, heading toward their biggest annual drop since the global financial crisis.
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