Unilever Raises Prices 2.3% as Higher Costs Meet Slower Volume Growth

Unilever’s third-quarter figures show the trade-off behind its response to rising costs: prices increased, but volume growth slowed. The consumer goods group raised prices by 2.3 per cent over the quarter as higher energy costs fed through to ingredients and shipping. Volume growth eased to 2.9 per cent from 5.5 per cent.

That combination matters because price increases can help protect sales value when production and delivery become more expensive, while slower volume growth may indicate that customers are buying less, switching products or responding to higher shelf prices. The figures do not establish which factor drove the slowdown. They do show that Unilever’s recent growth relied more on prices as costs rose.

Chief executive Fernando Fernandez described the quarter as one of “competitive growth,” citing continued volume growth and higher prices to offset commodity costs. The company’s results, however, varied considerably by product category and region. Home care was a strong contributor, while food and developed markets weighed on the group’s performance.

Home care and emerging markets lead

Sales in home care increased by nine per cent. Beauty and wellbeing grew by 5.7 per cent, and personal care by 6.3 per cent. Those results sit alongside Unilever’s stated intention to concentrate on health and beauty products, including Dove, Tresemmé and Vaseline, after agreeing in March to sell its food arm to US company McCormick for $45bn.

The expected sale would change the mix of businesses Unilever owns, but it has not yet removed food from the company’s results. The transaction is progressing, according to Unilever, and is expected to complete in the middle of next year. Until then, the food unit remains part of the group’s reported performance and continues to affect its growth profile.

Geography also produced a sharp split. Underlying sales growth in emerging markets reached 9.5 per cent, with double-digit growth in India, Turkey, Vietnam and Pakistan. Across those markets, volumes rose by six per cent and prices by 3.3 per cent. That combination suggests growth there was supported by both greater sales volume and higher prices, unlike a picture driven solely by price increases.

Developed markets moved in the opposite direction: sales fell by 0.9 per cent, including a 1.7 per cent decline in Europe. Unilever attributed the weakness to a “soft market environment.” The contrast makes regional performance central to reading the group’s headline growth: expansion in emerging markets was substantial, but it coexisted with declines across developed markets.

Food remains the clearest drag

Food sales rose just 0.1 per cent in the quarter, reaching $3.1bn. That was slower than the 1.2 per cent growth recorded in the first half of the year, when food was already Unilever’s weakest-performing division. The company said it faces particular pressure in the US condiments market, where competition has increased. It is making targeted price cuts on those products to support sales.

Those cuts point to a different pricing problem from the one affecting the wider group. Where costs have climbed, Unilever has raised prices to help offset them; in US condiments, it is reducing selected prices to compete for sales. The two responses can operate at the same time across a large product portfolio, but they create different pressures on growth and the ability to cover costs. The source figures do not specify how the cuts affected margins.

The food unit includes Marmite, Hellmann’s and Bovril. Its weak growth has particular relevance while the planned sale remains incomplete: the business continues to shape group results even as Unilever seeks to focus more heavily on health and beauty. RBC Capital Markets analysts described the third-quarter performance as “decent,” pointing to emerging-market sales and home care as more than compensating for sluggish growth in developed markets and food. They also said the food business was still dragging down group performance.

Guidance improves, with execution still to watch

Unilever now expects second-half underlying sales growth of about five per cent, compared with its previous range of between four and five per cent. That higher expectation offers a more positive near-term outlook, but the quarter’s figures leave several moving parts: the pace of volume growth, further cost pressure, demand in developed markets, and competition in US condiments.

For investors and business customers, the distinction between price-led and volume-led growth is worth tracking in subsequent results. Higher prices may cushion cost increases, but their effect on demand can vary across products and markets. The latest figures show that Unilever has areas of strength in home care and emerging markets, alongside a food business whose slow growth remains visible while the sale proceeds. How those divisions perform, and whether the expected sale completes on schedule, will shape the next reading of the group’s growth.