Unilever’s sales jump amid price hikes, driven by ice cream and dressings
26 Jul 2022 --- Unilever’s costs have spiked since the start of the COVID-19 pandemic, and inflation challenges are expected to persist. The company’s first-half operating profit margin fell to 17% from 18.8% a year earlier, even though Unilever increased prices by 9.8%.
Focusing on food, Unilever says that Foods & Refreshment underlying sales grew 7.3%, with 8.3% from price and 0.9% from volume. Pricing was broad-based and particularly high in dressings, given the input cost increases.
Cold offerings heat up
Ice cream’s underlying sales increased, driven by strong growth in the out-of-home business, which landed double-digit price and volume growth.
Magnum and Cornetto continued to prove popular, while new variant innovations also supported Unilever’s ice cream segment. However, ice cream suffered from supply issues in the US.
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Ice cream’s underlying sales increased, driven by strong growth in the out-of-home business, which landed double-digit price and volume growth.In-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 grew high single-digit with slightly negative volumes.
Unilever’s foodservice business, Unilever Food Solutions, landed strong double-digit growth and achieved sales above pre-COVID levels despite the severe China lockdown impact in Q2.
Hellmann’s also delivered double-digit, price-driven growth, supported by its global purpose campaign “Turn nothing into something.”
Raising sales guidance
Unilever has delivered a first-half performance that builds on the company’s momentum of 2021, despite the challenges of high inflation and slower global growth, stresses CEO Alan Jope.
Underlying sales growth of 8.1% was driven by strong pricing to mitigate input cost inflation, which, as expected, impacted volume. “We are now raising our sales guidance for the year. Underlying operating margin was on track at 17% for the first half,” he says.
Of Unilever’s three priority markets, the US and India again grew strongly, while sales in China were affected by the lockdowns in the second quarter.
At the beginning of the 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, now 4% of group turnover, again grew double-digit,” Jope outlines.
Meanwhile, in January, Unilever confirmed a major restructure that foretold the offloading of some of its global food brands. The company decided to narrow its focus on its ice cream segment and personal care business – which includes brands like Dove, Comfort, Lifebuoy and Rexona. Furthermore, as part of this significant shakeup, Unilever slashed 1,500 management jobs across the business.
“Our simpler, more category-focused organization came into effect as planned on July 1. This major change to Unilever’s operating model is an important further step that will underpin the delivery of consistent growth, which remains our first priority,” continues Jope.
The challenges of inflation persist, and the global macroeconomic outlook is uncertain, but we remain intensely focused on operational excellence and delivery in 2022 and beyond,” he states.
2022 outlook
The company’s guidance for underlying sales growth in 2022 was previously at the top end of a range of 4.5% to 6.5%. Still, Unilever now expects underlying sales growth to be above that range, driven by price with some further pressure on volume.
Unilever expects net material inflation for the year to remain high at around €4.6 billion (US$4.6 billion), with its forecast for the second half largely unchanged at approximately €2.6 billion (US$2.6 billion).
Edited by Gaynor Selby
