July 26, 2022 — Unilever’s costs have soared since the start of the COVID-19 pandemic, and inflation concerns are expected to persist. The company’s first-half operating profit margin fell to 17% from 18.8% a year earlier, even as Unilever raised prices by 9.8%.
Focusing on food, Unilever says Foods & Refreshment underlying sales increased 7.3%, including 8.3% in price and 0.9% in volume. Prices were diverse and particularly high for dressings, given rising input costs.
Cold offerings heat
Underlying ice cream sales increased, driven by strong growth in the out-of-home business, which recorded double-digit price and volume growth.
Magnum and Cornetto continued to be popular, while new variant innovations also supported Unilever’s ice cream segment. However, ice cream suffered from supply problems in the United States.
Home ice cream sales increased slightly, although volumes declined in Europe and North America, where markets contracted due to some post-COVID channel switching by consumers.
Foods also recorded high single-digit growth with slightly negative volumes.
Unilever’s food service business, Unilever Food Solutions, posted strong double-digit growth and delivered sales above pre-COVID levels despite the severe impact of the lockdown in China in the second quarter.
Hellmann’s also delivered double-digit, price-driven growth, supported by its Global Goals campaign.”turn nothing into something.”
Increase sales tips
Unilever delivered a first-half performance that builds on the company’s momentum in 2021, despite the challenges of high inflation and slower global growth, CEO Alan Jope said.
Underlying sales growth of 8.1% was driven by strong pricing to mitigate input cost inflation, which as expected impacted volumes. “We are now raising our sales forecast for the year. Underlying operating margin was on track at 17% for the first half,” he said.
Of Unilever’s three priority markets, the United States and India again grew strongly, while sales in China were affected by lockdowns in the second quarter.
Earlier this year, Unilever announced a strategic review of its global tea business, Ekaterra, including long-established brands such as Lipton, Brooke Bond and PG Tips.
“We continue to reshape our portfolio, completing the sale of the global tea business Ekaterra and the acquisition of Nutrafol, a leading provider of hair wellness products. Prestige Beauty and Health & Wellbeing, which now account for 4% of the group’s turnover, once again experienced double-digit growth,” emphasizes Jope.
Meanwhile, in January, Unilever confirmed a major restructuring that included offloading some of its global food brands. The company has decided to focus on its ice cream segment and personal care business – which includes brands like Dove, Comfort, Lifebuoy and Rexona. Additionally, as part of this significant reshuffle, Unilever has cut 1,500 management positions across the company.
“Our simpler, more category-focused organization went into effect as planned on July 1. This major change to Unilever’s operating model is another important step that will support the achievement of consistent growth, which remains our top priority,” continues Jope.
Inflation challenges persist and the global macroeconomic outlook is uncertain, but we remain intensely focused on operational excellence and delivery in 2022 and beyond,” he said.
The company’s forecast for underlying sales growth in 2022 was previously at the high end of a 4.5% to 6.5% range. Yet Unilever now expects underlying sales growth to be above that range, driven by prices with additional pressure on volume.
Unilever expects net material inflation for the year to remain elevated at around 4.6 billion euros (US$4.6 billion), with its second-half forecast largely unchanged at around 2, 6 billion euros (2.6 billion US dollars).
Edited by Gaynor Selby
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