China Food

Unilever’s ice cream business has made a strong start in China! The latest high-level forecast on the impact of the epidemic in China

In the face of rising costs, Unilever, which has brands such as Jiale, Menglong and keaido, plans to adjust prices again. At the first quarter performance meeting held yesterday, the senior management of the FMCG giant said that inflation was expected to exceed the original expectation in the second half of the year, so “we have to continue to accelerate pricing measures” to protect the long-term health of the business.

In addition, xiaoshidai noted that Unilever executives also “praised” China’s ice cream business, and talked about the impact of the epidemic on China’s business, the latest progress in the major adjustment of the global structure and so on. Next, let’s have a look



Graeme pitkethly, chief financial officer of Unilever, revealed that at present, several Unilever factories around Shanghai have been closed for several weeks. Alan jope, the company’s chief executive, said, “China’s regional containment reminds us that the epidemic is still affecting consumer demand patterns and our product supply capacity. However, the situation is very different in different regions, and many markets are returning to new normal.”

Pitkethly pointed out that in China, the impact of regional sealing on the performance in the first quarter is limited, but the impact is expected to expand in the second quarter, “especially our large-scale catering planning business in China”.

Looking back on the first quarter, Unilever China food and beverage still has something to be worth mentioning. According to the financial report, the turnover of the company’s food and beverage sector in the first quarter was 5.1 billion euros (about 35.497 billion yuan), and the basic sales increased by 6.5%. Among them, the basic price growth rate was 7.1%, and the basic sales volume decreased by 0.6%. In terms of splitting, during the reporting period, Unilever food business achieved high single digit growth and strong pricing performance in all major regions. Among them, Jiale continues to expand its product portfolio by responding to the fast-growing segment consumer demand (such as plant-based innovation in Latin America). In the first quarter, Unilever food planning achieved double-digit growth, and the turnover has exceeded the 2019 level before the epidemic. However, pitkethly said that considering the possible impact of the epidemic on China’s food planning business, he was cautious about the trend of this sector.

At the same time, Unilever ice cream also achieved growth, driven by the double-digit growth of outdoor channels, but the sales of home channels fell slightly. “We continue to see strong performance of Chinese ice cream.” Pitkethly said at the meeting. In fact, in the first quarter of this year, Unilever was also vigorously increasing the 100 billion scale of China’s ice cream market to “connect two children” to expand production capacity. Xiaoshidai introduced that in March this year, the company’s new ice cream factory in Taicang, Jiangsu Province was officially unveiled, which is Unilever China’s largest investment in the field of ice cream in more than 10 years. In addition, the company is currently building a production base in South China in Guangzhou. After the base is completed, it mainly produces home care products, personal care products, food and ice cream.

It is proposed to raise the price again

Like many of its peers, Unilever, which is experiencing soaring costs, has released a signal to raise prices again. According to pitkethly at the meeting, the prices of commodities commonly used by Unilever have increased significantly in recent months, including palm oil, soybean oil, crude oil, aluminum and so on. Taking palm oil, one of Unilever’s most expensive projects, as an example, pitkethly said its price had been at a 10-year high and had accelerated since January. He added that Russia and Ukraine accounted for most of the world’s sunflower oil production, and the conflict between the two sides affected the supply, leading the company to replace it with palm oil.

At the same time, Qiao Anlu also stressed that the recent ban on Indonesian palm oil did not involve Unilever’s main raw materials, so it had little impact. According to him, palm oil can usually be divided into crude palm oil and palm kernel oil. Among them, crude palm oil is divided into soft palm oil and hard palm oil. “Soft palm oil is used for cooking, which is the product in Indonesia’s export ban. Almost all we use are palm kernel oil derivatives or hard palm oil derivatives”. With the soaring prices of many bulk raw materials, pitkethly said that the input cost is expected to continue to rise in the second half of the year, and Unilever also raised the annual net raw material inflation cost from the original 3.6 billion euros to 4.8 billion euros (about 33.408 billion yuan).

He also said that in addition to coping through hedging, cost saving and improving efficiency, Unilever “had to continue to promote pricing”. At present, the company has absorbed most of the inflationary pressure with the help of price increases. According to Unilever’s financial report, its basic sales in the first quarter increased by 7.3% and the price contribution rate was 8.3%, but its sales also fell by 1%. Qiao Anlu said that at present, the decline in sales is slightly lower than the company expected. “We had expected sales to fall by low single digits and were ready to bear the result.” He said that in the environment of large cost fluctuations, Unilever’s strategy is “active pricing” to protect the income statement and maintain the long-term health of its investment brand and business. “Without pricing measures, our profit margin will be affected by up to 900 basis points.”.

Qiao Anlu, CEO of Unilever (information picture)


In addition, Qiao Anlu also pointed out that under inflation, people’s overall expenditure is under pressure, consumption upgrading and downgrade are happening at the same time, and Unilever’s product portfolio can meet different needs. “45% of our products are mid-range products, 35% are high-end products, and 20% are cost-effective products.”.

Personal anxiety

For Unilever, it is not only necessary to solve the environmental challenges in 2022, but also important to implement the global architecture adjustment.

As introduced by the snack generation, Unilever will launch a new business structure from July this year and reorganize five business departments: beauty and health, personal care, home care, nutrition and ice cream. Under the new structure, Unilever will reduce executive positions by about 15% and junior management positions by 5%, which is equivalent to about 1500 positions around the world.




For Unilever’s latest performance, Reuters quoted Barclays analyst Warren Ackerman yesterday as saying, “Unilever’s cost will quadruple this year compared with last year, which is why it needs such high pricing and the reason why the price will be higher.” Ackerman said that the price has not yet reached the highest point, and expressed concern about the sales performance of Unilever after continuing to raise prices. Reuters also mentioned that consumer goods manufacturers around the world are raising prices to make up for the soaring costs of energy, goods, labor and transportation. The conflict between Russia and Ukraine has also exacerbated the existing inflationary pressure. Although Nestle also had to raise prices to make up for increased costs, Unilever is more dependent on emerging markets, where inflationary pressures are the greatest. Some analysts worry that Unilever’s sales decline in the first quarter may indicate that “cash strapped” consumers are turning to cheaper private brands. Unilever is the latest group to report a sharp rise in consumer prices, but its competitors P & G and Nestle have successfully raised prices and sales have not declined, the Financial Times reported yesterday.

However, considering that Unilever maintains its full year guidelines, the Financial Times quoted Jefferies analyst Martin deboo as saying, “given the extreme bearish sentiment and low relative valuation of Unilever, we think this is a positive development.” According to Jefferies analysts, Unilever’s share price has fallen by 12.5% since Qiao Anlu became CEO in 2019 and before this performance, and the gap between Unilever’s share price and Nestle’s share price has reached a new high in 15 years.

Pay attention to “xiaoshidai” (wechat: foodinc) “and reply to” Unilever “to see the wonderful news.

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