Unilever announced on Thursday its decision to increase prices in response to elevated costs attributed to the Iran conflict, while also revealing a better-than-expected growth in first-quarter sales. The company, known for products like Dove soap and Axe deodorant, maintained its sales and profit margin projections for the year without adjustments, indicating its preparedness to navigate the current heightened economic uncertainties.
These price adjustments will be targeted towards specific markets and product categories, particularly those exposed to crude oil prices in the home care sector, with the changes anticipated to take effect predominantly in the latter part of the year. According to Srinivas Phatak, the company’s finance chief, regions such as parts of Asia, Africa, and Latin America, which have experienced the bulk of inflation, will witness more substantial price hikes compared to North America, where Unilever’s home-care segment holds a smaller presence.
Phatak emphasized that the pricing strategy will be strategic and competitive in nature. Consumer goods companies, in general, are grappling with significant challenges stemming from soaring commodity prices and disruptions in the supply chain due to the ongoing conflict between the U.S. and Iran, resulting in heightened costs for everyday products.
Unilever estimates a total cost inflation of approximately 750 million to 900 million euros for the full year, encompassing increased logistics and factory expenses. Phatak noted that while price adjustments will occur regularly, they will be incremental. If inflationary pressures persist, Unilever may consider implementing price increases closer to the higher end of the two to three percent range.
The last time Unilever executed a three percent price hike was in the final quarter of 2024, following the aftermath of the COVID-19 pandemic and the Ukraine conflict. Analysts, such as Chris Beckett from Quilter Cheviot, underscore the importance for Unilever to balance price increases with maintaining sales volumes, especially in constrained markets like Europe.
Competitors of Unilever, including Nestlé and Procter & Gamble, have also flagged potential cost escalations due to the Iran conflict. Despite these challenges, Unilever’s first-quarter sales growth was driven by robust volumes, particularly in the beauty and home segments, indicating a shift towards volume-driven growth after a period of relying on price adjustments.
CEO Fernando Fernandez highlighted the company’s positive start to the year, driven by volume growth in key brands like Dove and Axe. Unilever’s underlying sales growth of 3.8 percent in the first quarter exceeded analyst expectations, reflecting a solid performance across all business groups. Fernandez, who took over as CEO after serving as the finance chief, is leading Unilever’s transformation towards a sharper focus on personal care and beauty products following recent strategic business developments.
The company’s proactive stance in adjusting prices and emphasizing volume-driven growth showcases its resilience in navigating the challenging economic landscape influenced by global events like the Iran conflict.