The maker of Marmite, Dove soap and Magnum ice creams has warned that shoppers will face higher prices as its own costs soar by billions of pounds.
Unilever, one of Britain’s largest companies, said that it was facing £2.95 billion of higher costs this year, almost three times as much as the increase in costs it had struggled to absorb last year. The consumer goods company typically encounters £19 billion of costs each year.
Graeme Pitkethly, the chief financial officer, said yesterday that the business was facing the “highest inflation we’ve seen in a decade”.
He added: “There will be price increases on some products and in some markets but it will not be uniform across the world.”
Unilever said it faced a 60 per cent increase in the cost of crude oil and petrochemicals, used in packaging and plastics, as well as a 130 per cent increase in the price of sustainable palm oil, which it uses in its cosmetics and Hellmann’s mayonnaise. The price of soybeans, used in food products, has doubled while transport costs are five times higher than they were before the pandemic began two years ago.
Unilever, which traces its roots back to 1929 and the merger of Lever Brothers with the Dutch company Margarine Unie, employs 150,000 people in over 190 countries.
Other manufacturers and retailers including Nestle, Kraft Heinz, Procter & Gamble, Next, Greggs, PZ Cussons and Pladis, the owner of McVitie’s, have also warned of higher prices. John Allan, the Tesco chairman, has warned that food prices could rise by as much as 5 per cent.
Unilever and Tesco fell out six years ago when the consumer goods giant attempted to push through steep price increases, prompting Britain’s biggest supermarket chain to remove all the company’s products from its shelves. Tesco recently said that its price inflation was running at a lower level than the 3.8 per cent grocery industry average, however most supermarket chiefs expect food prices to increase this year.
Unilever said that its latest price increases would be across the board and that it was talking to retailers about individual products.
The pressure from higher prices comes amid a cost of living crisis, as household finances are being squeezed by soaring energy prices. The average home will need to find an extra £700 to cover annual bills after the energy price cap increases from April.
Unilever’s warning came as the company reported a 9.9 per cent rise in profits to £5.5 billion. Its revenues rose by 3.4 per cent to £44.2 billion last year.
Last month Unilever was criticised by one of its largest investors, Terry Smith, the founder of Fundsmith, for what he said was an obsession with “publicly displaying sustainability credentials at the expense of focusing on the fundamentals of the business”.
“A company which feels it has to define the purpose of Hellmann’s mayonnaise has in our view clearly lost the plot,” Smith said.
Alan Jope, Unilever’s chief executive, defended the company’s sustainability messages yesterday, saying that they resonated with younger consumers and helped to drive growth.
The company abandoned plans to take over GlaxoSmithKline’s £50 billion consumer goods division, which includes Sensodyne and Panadol, after investors protested.