Higher prices drove bigger-than-expected sales growth at Magnum-to-Marmite maker Unilever in the first quarter, but boss Alan Jope rejected ‘greedflation’ labels, arguing that the conglomerate handled increases “responsibly”.
Sales were up by 10.5% to €14.8 billion, which was due entirely to higher prices as the volume of goods sold dipped by 0.2%. That sales growth was well ahead of City expectations of 7.5%
“We did continue to price but we did it responsibly,” Jope said.
He added that the rate of rises had peaked for many items sold by the group,but does not expect prices to fall. However, further big hikes in the price of ice cream could be on the way with dairy costs up 22% from last year and cocoa up 50%.
However, the CEO - who will retire at the year-end - said European customers have been more resistant to these changes than those in other countries, because they had got used to a low-inflation environment.
“In the last 10 years, there has been almost no price growth in Europe,” he said. “It’s been almost a deflationary environment.
“There continues to be lower levels of pricing growth but relatively speaking, the net impact of going from deflation to inflation is felt very strongly in Europe.”
While the cost of many goods increased, Jope said Unilever would rather ‘shrinkflate’ than raise prices. Unilever was accused of ‘shrinkflation’ for its Magnum multipacks during the quarter, as the number of ice creams in a pack was cut from four to three.
“The very, very last thing we go to is raising prices,” he said. “In many of our markets, hitting a specific price point is really important.”
Changes in the composition and size of a product are counted as pricing changes by Unilever, rather than as changes in volume.
Steve Clayton, head of equity funds at Hargreaves Lansdown, said: “This was a forecast-beating outcome from Unilever who are proving adept at navigating through the current challenging inflationary environment.
“Sales were strong, but there was also good news on costs where Unilever say that pressures are no worse than guided.”
Shares are up 1.4% to 4,431p.
