Unilever CEO Alan Jope has said the company is happy to take “aggressive action” on pricing as inflationary pressures rise, with sales continuing to grow despite price increases.
This will allow the FMCG giant to “invest competitively” in marketing and research and development (R&D) to protect the health of its brands amid the ongoing cost of living crisis.
“Our strategy is to price aggressively to protect our P&L,” Jope said on a call with investors today (28 April), following the release of Unilever’s first quarter financial results. “That’s what gives us the ability to invest in the long-term health of our brands and our business.”
Jope promised to maintain “strong” investment in Unilever’s top brands – including its 13 brands worth more than €1bn (£844m), which collectively grew by 8.8% over the quarter. In particular, the business will ensure its media investment stays at “competitive levels”, he said.
So far, Unilever’s price increases have successfully offset a decline in volume sales. Underlying sales growth was 7.3%, with an 8.3% rise in price and a 1% drop in volume.
All divisions grew well even as price stepped up further from the levels seen in the fourth quarter of 2021, though there was some negative impact on volume. Home care in particular saw volume sales down 2.9%, but was offset by a 12.5% increase in price to drive underlying sales growth of 9.2%.
Beauty and personal care saw underlying sales growth of 7.1%, as a 7.4% price increase offset a 0.3% volume drop, and food and refreshment underlying sales grew 6.5%, with price up 7.1% and volume down 0.6%.
We are executing well in a very challenging input cost environment.
Alan Jope, Unilever
However, while sales in emerging markets, Latin America and North America experienced solid growth, in Europe sales grew just 0.7% as volumes declined. The UK was identified as one of the few European countries to have seen sales as a whole decline.
Chief financial office Graeme Pitkethly said volume drops in Europe are a result of “high back year comparisons” to the first quarter of last year, which took place during the Covid-19 pandemic.
But he admitted Unilever’s brands are “relatively more exposed to the categories that are suffering” from the cost of living crisis and unprecedented inflation. As such, further pricing action is being taken, with some further impact on volume expected as a result.
While Pitkethly said there is a “need” for a higher level of pricing, it is also important to “get the balance right”.
Jope added Unilever is “acutely aware” of the overall pressure on consumer spending, but said within the context of huge price hikes in utilities and gas, inflationary action in the company’s sectors are “relatively modest”.
The business also has “some insulation from downtrading”, he said, as only 20% of its products are in the value sector, while 45% are mid-tier and 35% are premium.
As such, Unilever now expects underlying sales growth in 2022 to be towards the top end of the previously guided range of 4.5% to 6.5%.Unilever highlights Ben & Jerry’s and Hellmann’s growth following brand purpose criticism
Meanwhile, ecommerce grew from 2% of total sales in 2016 to 14%, with Jope stating the company is now specifically designing products with ecommerce in mind.
Earlier this month, Unilever’s top marketer Conny Braams dropped the word ‘marketing’ from her job title, becoming chief digital and commercial officer. Speaking to Marketing Week, she said the move reflects the business’s aim to use its commerce channels to “build brands” as well as sell.
Overall, Unilever’s turnover increased by 11.8% to €13.8bn (£11.7bn).
“We are executing well in a very challenging input cost environment,” Jope concluded.
“There is more to do as we navigate our business through unprecedented cost inflation, but we are making good progress. We are committed to sustaining this step-up in our growth and competitiveness.”