China Food

High pricing brings high revenue! Unilever’s basic sales increased by 8.1% in the first half of 2022

“ 
despite the challenges of high inflation and global growth slowdown, Unilever still handed us a satisfactory semi annual “report card”.
 
 ”

Text: Tracy Weng

Source: foodaily daily food (id:foodaily)

 
On July 26, Unilever released its financial statements for the second quarter and the first half of 2022. The report shows that compared with 2021, Unilever’s basic sales in the first half of this year increased by 8.1% year-on-year, of which the basic sales in the second quarter increased by 8.8%.
 
Next, let’s take a look at the details.
 

Overall performance

 
In the first half of 2022, Unilever’s turnover increased by 14.9% year-on-year, reaching 29.6 billion euros. Operating profit was 4.5 billion euros, an increase of 1.7% year-on-year. The operating profit margin decreased by 200 basis points to 15.2%.
 
To some extent, these reflect the high inflation of Unilever’s input costs. In order to alleviate inflation, Unilever has taken measures such as raising pricing and streamlining costs, but it has only partially alleviated inflation and did not fundamentally solve the problem.
 
It seems that in the past two quarters, Unilever has raised product prices continuously, reaching 11.2% in the second quarter. There is no doubt that high pricing has brought about an increase in sales, but such an approach is bound to have a certain negative impact on trading volume.
 
Without considering the ekaterra business with flat sales (this global tea business line was sold by Unilever in early July), Unilever’s food and snack business increased by 7.3% and its sales fell by 0.9%. The outdoor ice cream and Unilever food businesses showed strong double-digit growth in the first half of the year, making up for the slowdown in the growth of household ice cream.
 
Image source: LinkedIn
 
From the perspective of global markets, emerging markets increased by 10.0% (including a 12.1% rise in prices and a 1.8% decline in sales), of which the Chinese epidemic caused an adverse impact of about 70 basis points. Prices in Latin America rose significantly by 19.1%, while overall sales fell by 4.8%. Prices and trading volume in South Asia have increased strongly. Under the high inflation environment, Turkey has achieved double-digit sales growth through dynamic management. The developed market increased by 5.5%, of which the price increased by 6.7%, and the trading volume fell by 1.2%. Thanks to Unilever’s excellent performance in seasoning categories and high growth areas such as health & wellbeing, the North American market business increased by 8.7%.
 

Unilever’s food business

 
The report shows that the basic sales of Unilever’s food and snack business increased by 7.3%, of which the price increased by 8.3% and the sales volume fell by 0.9%. Due to the decline in gross profit margin, the basic operating profit margin decreased by 170 basis points. Taking into account the increase in input costs, Unilever has generally set a relatively high price for condiments.
 
At the same time, the strong “rise” of outdoor related businesses also led to the high single digit growth of Unilever ice cream business sales. Among them, magnum and cornetto continued to maintain growth momentum with the support of new products, but ice cream encountered some supply problems in the United States. Although the sales volume in the European and North American markets has declined, on the whole, the business part of household sales shows an upward trend.
 
Image source: Sohu
 
In addition, although the trading volume of the food business decreased slightly, it achieved a high growth. Unilever said that although it was seriously affected by the Chinese epidemic in the second quarter, Unilever’s food service business still achieved strong double-digit growth, and even reached sales higher than the pre epidemic level. Affected by the high price and slightly decreased sales, the sales of household food showed a high single digit growth, especially the double-digit growth of hellmann’s driven by the price.
 

Future outlook

 
Despite the challenges of high inflation and global growth slowdown, Unilever handed over its satisfactory semi annual “report card” to us on the basis of its growth momentum in 2021.
 
Previously, Unilever’s guidance for sales growth in 2022 was at a high level in the range of 4.5% to 6.5%. Now considering the price and future sales, Unilever said that the future basic sales growth is expected to be higher than this range.
“We are improving our sales guidance this year, and it is expected that the basic operating profit margin in the first half of the year is expected to reach 17%.” Alan jope, CEO of Unilever, said.
 
At present, although the medium-term macroeconomic and cost inflation prospects are uncertain and unstable, achieving growth is still Unilever’s top priority. In this context, Unilever will expect to continue to improve its profit margins in 2023 and 2024 by optimizing pricing, product portfolio and streamlining costs.
 
Source: Unilever official website
 
At the same time, Unilever will continue to invest in the healthy development of its brand. In the first half of the year, Unilever has increased its investment in brand and marketing. In the second half of the year, it will make another investment with industry competitiveness in marketing, R & D and capital expenditure.
 
In addition, Unilever’s business model is also undergoing a major change. In January this year, Unilever officials announced a new, simpler and category oriented operation model, which is composed of five business groups (beauty and health, personal care, home care, nutrition and ice cream) and a technology driven core business operation Department of Unilever.
 
With regard to this model, Unilever said that the transformation of the operation model is expected to save about 600million euros in costs for the company within two years, which is also an important step to support the company towards sustained growth. “Although inflation challenges persist and the global macroeconomic outlook is uncertain, we are still highly concerned about operations and delivery in 2022 and beyond.”
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