Unilever chief says group is not ‘profiteering’ from inflation

Unilever’s chief executive has dismissed the notion that the consumer goods company is exploiting higher input costs to raise prices and fatten profits, saying it was not “profiteering in any way, shape or form” from inflation.

Speaking after a sales update that showed the maker of Ben & Jerry’s ice-cream and Dove soap increased prices almost 11 per cent on average last quarter, Alan Jope said Unilever was “very conscious that the consumer is hurting”.

The financial performance of large companies has come under scrutiny during the cost-of-living squeeze. Some central bankers have cautioned that companies flexing pricing power could be fuelling inflation.

While Unilever did not disclose profitability figures for the first quarter, Mr Jope on Thursday said the UK-based group’s operating margin had declined from 18.4 per cent in 2021 to 16.1 per cent last year.

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He said: “I know it’s an inconvenient truth, but we have not been profiteering in any way, shape or form.”

“We are certainly asking the shareholder to carry a proportion of the burden,” he added. “None of us want to pass pricing on to the consumer.”

The update from Unilever, whose products also include Persil laundry detergent, Sure, Dove and Lynx deodorants and Colman’s mustard, showed shoppers – particularly in North America – were unexpectedly willing to tolerate the price rises in the first three months of the year.

The company’s sales volumes recovered more strongly than expected from a 3.6 per cent drop in the previous quarter and were flat year on year. They held up better in the Americas – where they ticked up 0.6 per cent in spite of an 11.2 per cent increase in prices in the region – than in Europe, where they fell 3 per cent.

Unilever’s update, which followed similarly upbeat results from several rivals in Europe and the US in recent days, sent shares in the FTSE 100 company up 1.9 per cent in early trading.

The group recorded revenues of €14.8 billion in the period – an increase of 10.5 per cent on an underlying basis, which excludes the effects of acquisitions and currency movements.

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Still, chief financial officer Graeme Pitkethly said Unilever was forecasting commodity costs in the first half of the year to be €1.5 billion higher than the same period a year ago.

He added that the company was expecting inflationary pressures to be most acute in ice-cream and in Unilever’s nutrition products, which include Hellmann’s mayonnaise. This was because these were especially exposed to the costs of agricultural ingredients, for which prices were still rising sharply.

The cost of packaging and materials derived from petrochemicals were also still rising, although prices of palm oil were now falling, Mr Pitkethly said.

[ Irish workers experience sharp dip in living standards as inflation erodes pay rises — OECD ]

Mr Jope added that the company “only passed through 75 per cent of the cost increases” to consumers.

Pressed on a call with reporters on whether Unilever should be absorbing a bigger proportion of the cost increases given its profits and the prevalence of food poverty, Mr Jope said: “A conversation on the future of capitalism is a longer one for another day.”

The figures are the last under Mr Jope, who is being replaced by Hein Schumacher, head of Dutch dairy co-operative FrieslandCampina. – Copyright The Financial Times Limited 2023