The globally operating group of food and personal care products will therefore remain afloat for the time being on the thin rope of inflation. On the one hand, the group wants to pass on the increased costs of raw materials through price increases to the buyers of its more than 400 brands, including Knorr foods, Omo detergents and Magnum ice creams. On the other hand, it does not want to price its products out of the market. After all, consumers see their household budget shrinking further, for example due to rising energy bills. After all, cheaper private labels are lurking as an alternative, especially in Europe. Sometimes consumers now opt for smaller packaging, said Alan Jope, Unilever’s chief executive yesterday, during an explanation of the annual figures.
Unilever’s turnover did not appear to have suffered from the price increases, as became clear on Tuesday from the half-year figures of the group of companies. Total sales in the past six months were 8 percent higher than sales in the first half of 2021. The thirteen largest brands, such as Dove and Knorr, in particular held up. At the end of June, the counter remained at a turnover of 29.6 billion euros. Before that, consumers only bought 2 percent fewer (but more expensive) products. As a result of the higher purchase prices, net profit fell slightly to 3.2 billion euros, 200 million euros less than in the same period last year.
Loss of turnover in China
The strict lockdown in China resulted in a 9 percent loss of turnover in that country for Unilever. It has also more or less frozen its activities in Russia (1 percent of Unilever’s total) – serving only the local market. “Our primary concern is to protect our 3,000 employees in Russia,” said Jope.
The company previously expressed the expectation that turnover for this year will be 4.5 to 6.5 percent higher than last year. Now it is expected to surpass that most positive scenario, mainly due to higher prices. An additional investment in marketing should continue to entice consumers to purchase Unilever products.
It is also an exciting summer for the Unilever CEO for another reason. On July 1, the sale of the tea division Ekaterra (with Lipton and other brands) was completed to venture capitalist CVC Capital. That transaction yielded 4.7 billion euros. A reorganization of Unilever was also completed on the same date. The company is divided into five divisions, which should make the company simpler and more effective.
Luis in de pels
This new order was devised by the British chairman of Unilever, Alan Jope. Recently, however, he had to welcome a new board colleague in the form of activist shareholder Nelson Peltz. He bought 1.5 percent of the shares in the company and thinks Unilever can generate more money for shareholders, possibly by splitting up. He also advocates a more businesslike course, with less attention to the environment and workers’ rights. This creates even more distance from the course that Unilever’s Dutch CEO Paul Polman promoted until his resignation in 2019. With his (more or less forced) appointment, Peltz can become a louse in the skin of Polman’s successor Jope.
Since it was announced that Peltz had bought into Unilever, the share price has risen sharply. That price increase was partly the result of a 3 billion euro share buy-back program by Unilever, an exercise that has brought the company almost halfway through. Investors rewarded the half-year figures Unilever on the Amsterdam stock exchange on Tuesday with a value of more than 47 euros, after a price jump of about 3 percent.
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