Unilever warns of further cost hikes after prices rise in opening months of 2022

Consumer products giant Unilever, behind brands such as PG Tips and Marmite, has said the prices it charges for products have increased rapidly in the last few months.

Prices have gone up by 8.3%, the consumer giant said, as costs for raw materials skyrocketed.

The company also warned it is facing even higher costs in the remainder of the year.

The higher prices meant that some customers, especially those in Europe and Latin America, bought less from the company.

But the amount of money Unilever made in sales still increased by 7.3%, it said.

Whether or not that changes as prices potentially rise further remains to be seen.

Bosses at the company are keenly aware that if they charge more for their products, customers could be tempted to opt for cheaper alternatives.

This seemed to be happening in Europe over the last three-month period, where prices rose by 5.4% in the first quarter, and as a result consumers bought 4.4% less.

In the Americas prices rose by 10%, while the volumes sold only decreased 1%.

But chief financial officer Graeme Pitkethly said that in Latin America prices had risen 16%, and demand dropped 5.7%.

“That’s the largest pricing factor and volume that we’ve seen. But at that level of pricing, it’s not surprising that you get a volume reaction like that,” he said.

Mr Pitkethly said that in past years, European prices have often fallen year-on-year, so the shock of rising prices is clearer there.

“We will have to continue to price with these levels of cost inflation that are higher now. We will do that very responsibly and very carefully, balancing out consumer affordability, balancing out our competitiveness and making sure we continue to offer value to our consumers,” he said.

This year is set to be expensive for the food giant.

Just 12 weeks ago the business predicted that costs would increase by 3.6 billion euros (£3 billion) in 2022, but now that prediction has risen to 4.8 billion euros (£4 billion).

Mr Pitkethly said it was difficult to say how much this could feed through to the price of the products his firm sells.

“Who would have thought that we’d go from a situation of 3.6 billion (euros) of inflation for the full year up to 4.8 billion (euros) over the course of just one quarter,” he asked journalists on a call.

“That’s an incredible increase, a one-third increase over just 12 weeks, it’s very, very volatile.

“That means it’s extremely hard to predict where things will end up.”

When Unilever hikes its prices, billions of customers around the world are impacted.

The business sits behind products such as Ben & Jerry’s, Dove, Lipton, Flora, Hellmann’s, Domestos, Knorr, Vaseline and many more.

Chief executive Alan Jope said: “We are executing well in a very challenging input cost environment.

“Underlying sales growth of 7.3% was driven by strong pricing, with a limited impact on volume in the quarter.

“This performance was delivered against the backdrop of significant rises in input costs that have further accelerated through the first three months of the year, and the human tragedy of the war in Ukraine.”

He added: “There is more to do as we navigate our business through unprecedented cost inflation, but we are making good progress.”