Unilever said on Thursday it would raise prices to soften the hit from higher-than-expected costs driven by the Iran war, even as it reported first-quarter underlying sales growth ahead of analysts’ forecasts.
The London-listed maker of Dove soap and Axe deodorant, which has a market valuation of more than $120 billion, kept its 2026 sales and profit margin forecast unchanged, indicating it hopes to weather the impact of heightened economic uncertainty.
Consumer goods companies are navigating one of the most challenging cost environments in years due to surging commodity prices and supply chain disruptions from the U.S.-Israeli war with Iran.
Unilever said it expects full-year total cost inflation of about 750 million to 900 million euros ($876 million to $1.05 billion), including higher logistics and factory costs.
“That will be about 350-500 million euros higher than our prior expectations when we began the year,” Unilever finance chief Srinivas Phatak said. “It may not be possible for us to just cover it from cost actions, so we will take pricing.”
“There will be frequent price increases but in small doses,” Phatak said on an analyst call. The increases will be in select markets and categories, notably home care, and mainly take effect in the second half of the year, he added.
“It will be calibrated and it will be done in a competitive manner.”
Unilever rivals from Nestle to Procter & Gamble have warned of higher costs from the Iran war, with Reckitt flagging margin pressure, though French rival L’Oreal beat expectations as shoppers bought more premium products.
HOME AND BEAUTY BRANDS DRIVE SALES GROWTH
Companies are also grappling with the possibility of softening demand as household budgets could get squeezed if oil prices remain elevated and the conflict drags on.
Unilever raised prices sharply during the COVID-19 pandemic and in the wake of Russia’s invasion of Ukraine in 2022, passing commodity cost increases on to consumers and alienating many in the process who turned to cheaper private label brands.
It has only recently started winning back shoppers by slowing the pace of price increases and investing in marketing and innovation.
The company’s sales growth in the first quarter was driven by stronger-than-expected volumes – particularly in its beauty and home business – even as pricing was softer than forecast, marking a shift back to volume-driven growth after years of relying on price hikes.
“We have started the year well with volume-led growth driven by our Power Brands and a positive performance across all Business Groups,” CEO Fernando Fernandez said in a statement. He was promoted to CEO from finance chief last year to hasten a years-long restructuring started by his predecessor, Hein Schumacher.
He is reshaping Unilever to focus on personal care and beauty after spinning off its ice cream business last year and announcing plans last month to hive off its food division and merge it with spice maker McCormick.
The British company posted underlying sales growth of 3.8% in the three months to March, ahead of the 3.6% growth expected by analysts in a company-compiled consensus.
The volume rise was led by so-called power brands, which are its biggest including Dove, Axe and Dermalogica, which grew underlying sales by 5%, with 4% volume growth.
Via Reuters
