Ben & Jerry’s and Dove owner Unilever says it is starting to see “negative pricing” across some of its developing markets, but shoppers in Europe are continuing to bear the weight of the group’s inflationary pressures.
Unilever registered €5.9 billion ($6.4 billion) in operating profits for the first half of 2024, a 7.8% jump from the same period last year. The consumer goods giant also increased its margin to 19.1%.
Unilever has its consumers to thank, who swallowed the company’s further price rises as the lasting effects of COVID-19 continued to hit the group.
However, Unilever CEO Hein Schumacher’s reasoning for the price increases suggests that as inflation regulates, there won’t be many extra costs left to pass on to consumers in the future.
“In the first half of 2024, we also saw the combined benefit of deflation in some components of our commodity basket and the pricing carryover from a period of higher commodity inflation,” said Schumacher.
Inflation has fallen across the Western world after staying stubbornly elevated in the double digits through late 2022 and early 2023. It is now at or approaching central banks’ targeted 2% in the U.K. and the eurozone.
According to the Bloomberg Commodity Spot Index, input prices hit their highest point in a year in May but have started to fall in the months since.
Schumacher’s comments indicate Unilever’s first-half profits were partly a result of consumers absorbing that older commodity inflation.
The Unilever CEO said it was seeing negative pricing in its South Asian and Southeast Asian markets. In cases of commodity deflation, the group says it is adjusting prices accordingly.
However, that hasn’t yet filtered through to its markets in Europe and the U.S., where consumers continue to bear the brunt of cost increases.
Unilever group also blamed falling sales at its ice cream brand, Ben & Jerry’s, on poor weather at the start of Europe’s summer.
Inflation still weighing on consumers
One consistent theme of the post-COVID era of high inflation has been companies’ knack for successfully passing on rising costs to consumers.
Unilever’s latest profit bump is one of several that have come at least in part from its customers, who have been bearing the brunt of higher input prices.
A joint study of 1,300 businesses last year by IPPR and Common Wealth found profits in some of the world’s largest economies rose by 30% between 2019 and 2022, well above inflation.
Similar research by Unite the Union found that 60% of companies it analyzed increased their profits in the post-COVID period.
Swiss chocolate maker Lindt & Sprüngli is one of the companies that has struggled with high input costs, such as soaring cocoa prices.
However, as in many companies’ cases, Lindt successfully sold its chocolate bunnies to consumers at an inflated price.