Unprecedented inflation ahead as Ukraine war adds to costs, says Unilever | Unilever

The consumer goods firm Unilever has said “unprecedented cost inflation” lies ahead as Russia’s war on Ukraine has added to a surge in energy and ingredient costs, and appeared to imply that shoppers are likely to pay more for well-known brands.

The company, which makes goods ranging from Dove soap to Magnum ice-cream and Marmite, said on Thursday it expected its costs to rise by €2.7bn (£2.3bn) in the second half of 2022, after an already steep increase on the €2.1bn expected for the first half.

The increased costs forecast comes as companies grapple with the inflationary pressures that built as the global economy rapidly recovered from the shock of coronavirus pandemic lockdowns and central banks cut interest rates. Russia’s invasion of Ukraine has added to the mix by pushing up energy prices.

Unilever has been directly affected by the invasion. The company has been forced to stop all operations in Ukraine and last month suspended all imports and exports of products into and out of Russia as well as all advertising spending in the country. Unilever had remained initially silent on whether it planned to pull out, and has been criticised by Ukraine’s ambassador to the UK, Vadym Prystaiko, for continuing to run operations in Russia.

Whitbread, the owner of the Premier Inn hotel chain and some restaurant brands, also warned on Thursday of faster cost increases of between 8% and 9% annually because of the impact of the war in Ukraine on energy and food prices.

However, Whitbread also felt confident enough in its prospects to restore its dividend to investors, more than two years after it paused payouts as hotels were forced to close. It said its profits would be partly protected by its “pricing power”, suggesting its executives think they can pass costs on to consumers.

Unilever has also passed on higher costs to consumers. It reported underlying sales growth of 7.3% in the first three months of 2022 thanks to steep price increases, even as the volume of sales dropped by 1%.

Alan Jope, Unilever’s chief executive, said it was a “very challenging input cost environment” but said it was a “solid quarter of sales growth” led by more expensive beauty products and nutritional supplements.

“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,” Jope said.

Unilever said it would defend its profit margins through pricing among other tactics.

Leave a Reply

Your email address will not be published.