Unilever PLC (LSE:ULVR) and very likely rivals such as Nestle S.A. (OTC:NSRGF, VTX:NESN) and Danone (OTCQX:DANOY) are expected to keep on hiking prices into 2023, according to Barclays.
The bank still forecasts a net material inflation increase of €1.5bln (£1.3bn) in Unilever products as it sees inflation “remaining high in the first half, before softening through the year.”
The London-based conglomerate’s prices increased 10.7% year on year in the first quarter, driven mainly by 13.4% hikes in its home care and nutrition divisions.
Sales of home care products, which include brands such as Domestos and Cif, jumped 10.2% despite volumes dropping by 2.8%.
Nutrition brands like Hellman’s and the Vegetarian Butcher saw volumes drop by 1.3%, but the price hikes were able to counteract this, lifting revenues by 11.9%.
Unilever’s beauty and wellbeing brands experienced the smallest price hikes, totalling a 6.5% rise.
Personal care product prices also saw smaller hikes, at 9.4%.
Conveniently, the volumes of these two categories were the only two to increase, by 3% for personal care and 2.6% for beauty and well-being.
Yet, Unilever’s chief executive officer Alan Jope claimed that increases weren’t “profiteering in any way, shape or form”.
“None of us want to pass pricing on to the consumer,” he added.
Price hikes for the group’s ice cream brands, which include Ben & Jerry’s, are expected to continue as Unilever claims rising costs are squeezing margins.
Finance chief Graeme Pitkethly said that he believed dairy prices will be up 22% annually in the first half of 2023.
This prediction comes despite the FAO world food price index reporting that diary costs had dropped 10.7% year-on-year.
In fact, dairy prices have been falling all throughout 2023 and remain 13.2% lower than when costs peaked in June, according to the index.
The complete world price index, which tracks various categories including meat and sugar prices has been falling for a year since it peaked in March 2022.
Barclays concluded by telling consumers to “not expect cost deflation” from Unilever in 2023.