Home Business NewsBusiness Unilever’s weak pricing power comes into focus

Unilever’s weak pricing power comes into focus

by LLB Reporter
28th Apr 22 9:38 am

The true definition of a company with pricing power is one which can push up its selling prices without dampening demand. Unileverhas managed the first bit but not the second. Each of its three core divisions has seen a drop in sales volumes in its first quarter as a result of raising prices.

While Unilever talks about another solid quarter of sales growth, pressure on costs means its profit margins aren’t suddenly going to fatten up because people are paying more for a jar of Marmite or a box of Magnum ice creams. In fact, it is guiding for operating margins to be at the bottom end of its previously guided range.

“In the UK, consumers are starting to trade down to supermarkets’ own-label products because they are cheaper. That presents a real threat to Unilever’s earnings in the near-term if people shun its higher priced items. There is a risk this trend spreads to other geographies,” said AJ Bell’s Russ Mould.

“The inflationary pressures have taken the spotlight off chief executive Alan Jope for a while, but a resumption of normal trading conditions will inevitably revitalise the debate over whether he is the right man to keep running the business, given poor returns for shareholders under his leadership.”


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