Unilever aims to grow through volume, not price
In Unileverâs half-year results, the multinationalâs food segments saw a slight increase in volume growth, complementing its aim to let volume drive growth. Conversely, commodity deflation in some areas has seen Unilever reducing price growth significantly compared to previous years.
Uptick in volumeâOverall volume growth for the half-year was 2.6%, compared with a 2.2% volume growth in Q1â. According to Hein Schumacher, Unileverâs CEO, the company hopes growth to be driven by an improvement in volume sales. Â Â
Nutrition, which in Q1 saw a decline in volume growth by 0.4%, has now reached a flat volume growth, with sales driven by âpower brandsâ Knorr and Hellmanâs, collectively representing two thirds of turnover for the category.
However, growth in ice cream was âclearly below our ambitionâ, said Unileverâs COO Fernando Fernandez. It had an underlying volume growth of -1%, even more significant than the negative 0.9% underlying volume growth of Q1. Growth has been negatively affected by shortfalls in China due to tougher market conditions, and shortfalls in Europe due to poor weather at the start of the summer season. Unileverâs separation from ice-creamâ will be completed by 2025.
Europe also returned to volume growth from its -1.5% volume growth in Q1. Now, Europe has seen a volume growth of 0.5% in these half-year results.
The growth in prices for Unilever has also slowed due to the reversal of the commodities cycle, said Fernandez, with the moderate return of commodity inflation.
Unilever’s results in numbers-       Turnover was âŹ31.1bn
–Â Â Â Â Â Â Â Unilever saw an underlying sales growth of 4.1%
–Â Â Â Â Â Â Â It saw a volume growth of 2.6%
–Â Â Â Â Â Â Â Underlying operating profit increased by 17.1%
–Â Â Â Â Â Â Â Nutrition saw an underlying sales growth of 3.2%, a 3.2% underlying price growth, and a flat volume growth
–Â Â Â Â Â Â Â Ice cream saw an underlying sales growth of 0.6%, an underlying price growth of 1.6% and a -1% underlying volume growth.
Innovation growth âUnilever aims to focus on innovation. The company has increased capital in brand and marketing investment to 15.1% of turnover, or âŹ0.7bn.
âWhen it comes to innovation, there we have made a bit of a change,â said Schumacher. âFirst of all, we want to make sure the average size of our innovations will double this year, so that means doing fewer, bigger and better.â Secondly, it aims to grow a âselect setâ to platforms of more than âŹ100mn.
A pricing deceleration?âAccording to Schumacher, âpricing continued to moderateâ in the first half of 2024. Price growth has indeed decreased significantly.
In Q2 2024, pricing grew by 0.6% in ice cream and 2.2% in nutrition, compared with 11.8% in nutrition and 12.1% in ice cream in Q2 2023 (in Unilever as a whole, Q2 2023 saw an 8.2% compared with 1% in Q2 2024). Why is this?
âWhere we have seen real commodity deflationary impact, we have adjusted price accordingly to give back to the consumers,â said Schumacehr, âand to focus on our competitiveness, and ensuring that volume-led growth story that weâve talked about.â The company are even implementing negative pricing in some pockets of the business.
Much like NestlĂ©â, Unilever expects inflation to return to more ordinary levels after recent inflationary spikes. While Unilever has seen anomalies such as the increase in popularity of private-label brands, Schumacher suggests that things will âsettle there a bitâ when inflation levels normalise. Â