Marmite and PG Tips maker Unilever warns of price rises

Marmite and PG Tips maker Unilever warns of price rises

Consumer giant Unilever has warned it plans to raise prices to cope with “elevated levels” of cost inflation which it expects to continue next year.

The company that owns brands such as Marmite, PG Tips and Dove says it has already taken “appropriate pricing action” which will continue across its global operations and within each of its product divisions.

The company reported a 2.5% rise in sales for the third quarter of 2021. Growth was supported by a 4.1% increase in prices while the volume of goods sold fell by 1.5%.

The UK consumer prices index (CPI) measure of inflation slowed to 3.1% in the year to September, according to the Office for National Statistics. However, inflation is expected to accelerate in the coming months due to a rise in energy costs and continuing disruption to UK and global supply chains.

Unilever’s chief financial officer Graeme Pitkethly said: “We expect inflation to be higher next year than this year.”

Unilever sells to businesses such as retailers, supermarkets and wholesalers who will be considering whether or not to pass on higher costs to shoppers.

But Danni Hewson, financial analyst at AJ Bell, said Unilever was facing a “balancing act of not increasing prices so much that its products are no longer competitive”.

“It is a real test of the strength of the company’s brands,” she said. “After all, will we really stick with branded soap at a materially higher price when there’s an unbranded alternative sitting next to it on the shelf which is an order of magnitude cheaper?

“If enough consumers decide they can put up with a cheaper alternative then it would become a big problem for Unilever.”

Unilever’s brands include Simple skin care, Sure deodorant and Vaseline. It also produces Ben & Jerry’s ice cream, Cornetto, Hellmann’s mayonnaise and Knorr stocks.

Earlier this week, the boss of the Food & Drink Federation warned that the hospitality industry, which includes restaurants and pubs, was seeing “terrifying” price inflation of between 14% and 18%.