The maker of Marmite, Dove soap and Ben & Jerry’s ice-cream, Unilever, has reported rising revenues after it increased prices by nearly 10%, even as consumers squeezed by the cost of living crisis bought fewer products.
The FTSE 100 company said its underlying sales rose by 9.1% in the first half of the year compared with a year earlier, in a statement to the stock market on Tuesday. Price rises accounted for the entirety of the growth, with the volume of goods sold globally dropping by 0.2%.
Profit margins for the group rose slightly to 17.1% but the company insisted it was not banking cash at the expense of consumers, saying margins remained well below those booked before the pandemic as it had been forced to absorb cost increases.
“We absolutely have not passed through the full extent of inflation as we are cognisant of the pressure on consumers,” said the Unilever finance director, Graeme Pitkethly.
The company said it expected the rate of price rises to moderate throughout this year and that most increases reflected cost increases that had already hit the business. However, Pitkethly said there was a “very uncertain and volatile environment, particularly regarding agricultural commodities” that could mean further inflation spikes on some food products.
Consumer goods companies have been on the frontline of inflationary pressures as material and energy costs have risen as a result of coronavirus pandemic disruption followed by Russia’s war in Ukraine. Many firms have responded by raising prices.
Rising corporate profits have proved controversial as inflation has caused a cost of living crisis in many parts of the world, with some politicians accusing big business of “greedflation”.
Unilever’s 9.4% price rises helped sales to beat analyst forecasts and contributed to a 22% rise in operating profits to €5.5bn (£4.8bn) in the first six months of 2023 against the same period a year before.
Emma-Lou Montgomery, an associate director at Fidelity International, said:
“The cost of living is proving profitable for this global giant, with full-year underlying sales growth expected to beat forecasts.”
Unilever said Europe was particularly exposed to price growth because of the popularity of ice-cream brands such as Magnum and Ben & Jerry’s and other products such as salad dressings, on which Unilever had increased prices most rapidly. Revenues in the UK rose by more than 10%, an increase that was “price-led”.
The company said brands such as Hellman’s mayonnaise, Sunsilk hair products and Rexona deodorant – known as Sure in the UK and Degree in the US – had increased sales by volume.
Hein Schumacher, who was chosen as Unilever’s new chief executive in January, has been leading the business for only a month after taking over from Alan Jope amid pressure from the activist investor Nelson Peltz. Schumacher said he wanted a simplified operating model to “drive improved performance and competitiveness”.
Schumacher will also have to decide whether to continue Unilever’s business in Russia, which accounted for 1.5% of the group’s profits in the first half of 2023 and has net assets of €800m.
Many large companies have abandoned operations in the country but Unilever has argued thatabandoning its operations would put the business in the hands of the Russian state. That stance has proved controversial, with the Ukrainian government naming it as an international sponsor of war.
The company was also criticised on Sunday after an executive wrote that it would comply with all laws where it operated, including a Russian law permitting conscription of workers.
On Tuesday, Schumacher said that continuing to operate in a “constrained manner” in Russia was the “least bad option” and that abandoning the business there could lead to it being taken over and helping to fund the Russian state.
