It is difficult to find a better representation of the pressures on global consumers than the 2022 results from consumables behemoth Unilever.
Input cost inflation saw Unilever’s operating margins decline 230bps, but by passing on some of the higher prices to customers, the group carved out 9% sales growth and a 0.5% increase in operating profit to €9.7bn.
However, for a company that operates in a sector that is considered to have a low price elasticity of demand, it was evident higher prices have drove some customers elsewhere with underlying volumes falling 2.1%.
“Has Unilever put its prices up too much? That’s the question after it once again reported a rise in revenues and a decline in sales volumes,” said Russ Mould, investment director at AJ Bell.
“While consumers have got used to everything costing a bit more in the shops, there is still a point where certain items become unaffordable, or where the price-point for a cheaper alternative is too good to ignore.”
“Even though Unilever boasts some of the world’s most-loved brands, sometimes consumers have no other choice but to plump for generic versions due to their financial circumstances. And if you listen to what supermarkets have been saying recently, own-label products are flying off the shelves.”
Underlying volumes in their Home Care and Personal Care divisions were hit the hardest, falling 3.5% and 3.7% respectively.
The Home Care division’s revenue rose the most of all, gaining 11.8%, as Unilever hiked prices by 15% to stave off surging input costs for products such as floor cleaner.
The company said they expected cost inflation to persist in 2023 and cautioned investors to expect only a modest increase in margins in the year ahead.
Unilever shares were broadly flat in Thursday, up just 0.4% at the time of writing.