Companies are gearing up to pass on at least some inflation costs to consumers, as prices will likely stay elevated for at least another year.
The consumer price index jumped 8.5% in March compared to 12 months earlier, as inflation continues to surge at its fastest pace in more than 40 years.
Between supply-chain disruptions, labor shortages, and the war in Ukraine, companies are now raising their prices, even if it means reduced sales, now that the U.S. is experiencing a prolonged inflationary period.
Unilever is the latest company to sound alarm bells over runaway inflation, as the major consumer goods multinational announced it recently raised prices for its products by an average of 8.3%.
Unilever CEO Alan Jope said in a statement that the price increases were due to the “unprecedented cost inflation” currently battering the global economy, and he blamed supply-chain constraints on ongoing events like Russia’s invasion.
London-based Unilever is one of the largest global providers of all sorts of consumer goods, including food, condiments, and cleaning agents.
The price hikes have already put some consumers off buying Unilever’s products. The company reported a 1% overall drop in sales volume over the past three months. Costs of bleach and detergent rose 12.5% over the past three months, well above the average, and sales volume of these products has dropped nearly 3%.
But Unilever doesn’t see a slowdown of inflationary pricing anytime soon. The war in Ukraine and the soaring costs of certain commodities will likely push Unilever to bump up its prices even more before the end of the year, the company said in a statement.
“It is inevitable you will see pricing accelerate through the rest of the year,” Jope said. “Has Unilever’s pricing peaked? No, not yet.”
The war in Ukraine has already forced Unilever to adapt its recipes to account for scarce raw materials. The company announced Thursday that it had begun using cheaper rapeseed oil in some of its recipes to make up for the supply gap of other edible oils such as sunflower oil, of which Ukraine made up over 47% of the world’s exports.
The invasion has hit the global shipping and logistics industry with delays and put greater stress on individual households’ budgets through higher energy costs. And inflation has even led some countries to adopt more protectionist policies that could have consequences on the global supply of critical commodities, such as Indonesia’s recent ban on exporting palm oil, which is set to raise the price tags of several popular processed foods and cosmetics around the world.
Unilever suggested that it would continue adjusting prices for its products through 2023 and 2024 “as market conditions normalize.”
The company makes around 40% of its profits from food and refreshments, products that are forecast to experience some of the largest price hikes long term. The World Bank recently predicted food prices to rise 22.9% before the year is over.
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