Hot weather boosts sales at Unilever as demand for ice cream soars, but boss sounds the alarm over rising costs
Surging demand for ice creams as temperatures rise and lockdown restrictions are eased has lifted sales at Unilever – but rising costs are squeezing profits.
The consumer goods giant, which owns Magnum, Ben & Jerry’s, Marmite and Hellmann’s, said ice cream sales grew by ‘double digits’ in the first half of 2021.
And as people ate out more often, the firm said sales of restaurant supplies grew as well, along with beauty products such as Dove deodorants and skin lotions.
Unilever boss Alan Jope (pictured) said the company’s overheads were going up ‘across the board’, with prices of raw materials such as crude oil, palm oil and soy bean oil on the rise
But shares tumbled 5.9 per cent, or 252.5p, to 4050.5p – wiping £6.6billion off the company – as the sunny picture was clouded by fears of rapidly rising costs.
Unilever boss Alan Jope said overheads were going up ‘across the board’, with the prices of raw materials such as crude oil, palm oil and soy bean oil on the rise, as well as the cost of freight transport and packaging.
He said the firm had been unable to cushion the blow through savings alone – with the underlying profit margin falling from 19.8 per cent to 18.8 per cent – and warned that price rises were on the way.
Unilever previously fell out with major customer Tesco when it hiked prices in 2016. But Jope insisted yesterday there was no other realistic option.
As pandemic restrictions ease across the world, demand for freight services and raw materials from businesses has spiked again – triggering price rises.
Jope said this had led to ‘very material cost increases’ for Unilever the like of which it had not seen for a decade. He stressed that any hikes in the UK and Europe were likely to be ‘in the low single digits’.
Overall Unilever said its turnover in the first half of 2021 rose 0.3 per cent compared to last year, including a 1.2 per cent rise in the second quarter.
In food, sales of Magnum and Ben & Jerry’s jumped by ‘double digits’ as Europeans increasingly ventured outdoors and enjoyed the warm weather.
And in personal beauty, Unilever said sales of skin care products grew by ‘double digits’ as well.
Despite the rosier picture, however, rising costs cast a shadow over the results. And the firm is also scrambling to contain a controversy over Ben & Jerry’s decision to stop selling ice cream in Israeli settlements in occupied Palestinian territories.
Naftali Bennett, Israel’s prime minister, has condemned the ‘clearly anti-Israel step’ and warned Unilever it would have ‘severe consequences’.
Jope distanced Unilever from the decision by Ben & Jerry’s and stressed Unilever was ‘committed’ to Israel.