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Unilever, Carlsberg and Pernod Ricard are increasing the pressure on consumers worldwide with higher prices for Dove soap, beer and Havana Club rum, raising the risk that shoppers may start to balk at spending more.
All three firms reported sales growth at about double the pace analysts had expected. Unilever raised prices by over 8 per cent in the first quarter and warned more hikes were on the way. It forecast full-year revenue growth at the top end of its forecast, though warned that profitability may suffer as consumers cut back on purchases.
Consumer-goods makers are walking a tightrope as the war in Ukraine exacerbates a surge in transport, packaging and raw material costs. Their dilemma is that they need to raise prices, but if they do too much, consumers will switch to cheaper products. Unilever forecast raw material cost inflation of $2.8 billion in the second half. That contrasts with the assessment of European Central Bank Vice President Luis de Guindos, who said on Thursday that he thinks inflation has almost reached its peak and it will decline in the second half.
Carlsberg’s pricing rose by 13 per cent due to a combination of more expensive beers and getting more sales from bars, where the margins are higher. Unilever reported a 1 per cent dip in first quarter sales volumes, and some analysts are worried this is an early sign that cash-strapped consumers are switching to cheaper brands.
“As far as pricing and volumes, I think we are in uncharted territory,” Chief Executive Alan Jope said. “While we’re acutely aware of the pressure on consumers, we believe that increasing prices in response to this extreme commodity cost pressure is the right thing to do.”
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