Prices have not peaked yet, says Unilever CEO

The CEO of consumer goods giant Unilever said Tuesday that prices would likely continue to rise in the near term, adding that his firm had a playbook for high inflation thanks to its business dealings in markets like Argentina and Turkey.

Speaking to CNBC’s Joumanna Bercetche at the World Economic Forum in Davos, Switzerland, Alan Jope talked about how his firm was managing its operations in the current climate.

“For the last 18 months we’ve seen extraordinary input cost pressure … it runs across petrochemical derived products, agricultural derived products, energy, transport, logistics,” he said.

“It’s been feeding through for quite some time now and we’ve been accelerating the rate of price increases that we’ve had to put into the market,” he added.

“So far, the consumer response in terms of volume softness has been very muted, the consumer has been very resilient,” Jope said.

“We do see the prospect of higher volume elasticity as winter energy costs hit, as households’ savings levels come down and that buffer goes away and as prices continue to rise,” he said.

Last October, Unilever published its third-quarter results for 2022, with the firm reporting price growth of 12.5%.  

Jope was asked if he foresaw any moderation when it came to inflationary pressures. “It’s very hard to predict the future of commodity markets,” he replied.

“Even if you press the oil major CEOs, they’ll be a little cagey on giving an outlook on energy prices.”

Unilever’s view, he said, was that “we know for sure there’s more inflationary pressure coming through in our input costs.”

“We might be, at the moment, around peak inflation, but probably not peak prices,” he went on to state.

“There’s further pricing to come through, but the rate of price increases is probably peaking around now.”

Unilever has a global footprint and owns brands including Ben & Jerry’s, Magnum and Wall’s.

During his interview with CNBC, Jope touched upon the international dimension of his business and how the experience of operating in a range of markets was steering it through the current climate.  

“Nobody running a business at the moment has really lived through global inflation, it’s a long time since we’ve had global inflation,” he said.

“But we’re used to high levels of inflation from doing business in places like Argentina, or Turkey, or parts of Southeast Asia,” he added.

“So we do have a playbook, and the playbook is that it’s important to protect the shape of the P&L by landing price.”

“And so it’s not that we’ve taken more price, we just started acting earlier than many of our peers, and the guidance that we’ve been getting from our investors is they support that and feel that that’s an appropriate action.”  

This, Jope explained, was “something we have learned from being in these high inflationary markets, though … much of that inflation is currency weakness, historically.”

“But now those markets are having to deal with the combination of commodity pressure and currency weakness. So our instinct is to act quickly when costs start coming through.”