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Unilever Celebrates Volume Growth Amidslowing Price Increases

Unilever Celebrates Volume Growth Amidslowing Price Increases Unilever Food and Beverage Business

Consumer goods powerhouse Unilever has reported third-quarter volume growth, primarily driven by its core ‘power brands’, which benefited from reduced price increases.

The owner of notable brands such as Marmite, Hellmann’s mayonnaise, and Ben & Jerry’s has surpassed expectations for sales, volume, and pricing during the quarter, maintaining its full-year sales outlook.

Additionally, Unilever is planning to spin off its ice cream sector, with progress expected before the end of next year.

In its quarterly results announcement on October 24, Unilever revealed that all its business divisions reported year-on-year volume growth. CEO Hein Schumacher emphasized that it has been a year since launching the Growth Action Plan, remarking, “It’s clear this isn’t a quick fix, but we are encouraged by the progress we’ve made so far.”

The turnaround strategy targets a cost reduction of €800 million ($863.9 million) by 2027, partially through the reduction of 7,500 jobs across the organization.

As Schumacher indicated, the plan is focused on “doing fewer things better and with greater impact.” The company reported a favorable quarterly performance, with underlying sales rising by 4.5% year-on-year and volume increasing by 3.6%—the highest gain since the first quarter of 2021. More than 75% of turnover originated from its core power brands, which experienced volume growth of 4.3%.

CFO Fernando Fernandez shared that these power brands continue to drive growth in Q3. Notably, pricing decreased by 0.9% for the quarter, a stark contrast to the peak price increase of 13.3% recorded in Q4 of 2022. Analysts were surprised by today’s results, which indicated better-than-expected performance, anticipating a mere 1% price increase, a 3.2% volume rise, and a 4.2% increase in underlying sales.

The turnover for the quarter stood at €15.2 billion, consistent with the previous year. Moving forward, the company maintains a full-year sales growth forecast of 3% to 5%.

Moreover, Unilever’s ice cream segment reported a remarkable 9.8% growth in the quarter, attributed to 2.9% from higher pricing and 6.7% from increased volume. Fernandez noted, “Performance in ice cream is critical as we advance the separation process, which is progressing as planned.”

In discussing the specifics of this operational separation, the company highlighted, “We are making strides in establishing the legal structure, developing a standalone operating model, and carving out financials.”

When examining performance across its markets, Unilever disclosed that developed markets, which account for 43% of group turnover, saw an increase in underlying sales of 6.9% during the quarter, fueled by 6.8% from volume and a modest 0.1% from pricing. In contrast, emerging markets, representing 57% of group turnover, experienced a more subdued sales growth of 2.9%, bolstered by 1.4% from volume and 1.5% from price.

Commenting on these results, Claudia Gilbert-Allen, an analyst at Barclays Investment Bank, stated, “Overall, this is a strong result, and we perceive this as the initial phase of a multi-year turnaround.”

In its current strategy, Unilever is addressing key issues within the food and beverage industry trends, ensuring it adapts effectively to the evolving food and drink business landscape and consumer trends.

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