Unilever steps up pricing as it continues to deliver strong underlying sales growth
As a result of rising costs across the global food supply chain, Unilever's pricing increased 1% in Q1 2021 and 1.6% in Q2 2021, noted Unilever CFO Graeme Pitkethly in the company's H1 2021 earnings call, who warned of further price increases for the rest of the year.
"We are stepping up pricing in response to rising commodity inflation. Price growth in the month of June was 2.2%. We expect this acceleration to continue into the second half," said Pitkethly.
Despite increased pricing being a contributing factor to the company's H1 2021 growth numbers, Unilever reported first half underlying sales growth of 5.4%, with volume growth of 4% and 1.4% from price.
Tea business separation
Commenting on Unilever's previously-announced move to separate its tea business from the rest of the company's portfolio, Unilever CEO Alan Jope said that the company would consider an outright sale or IPO of the business.
"The operational separation of our tea business is now substantially complete. We created an attractive standalone business with dedicated leadership. We’re very pleased with the progress we’ve made on the complex separation... we’ve filled 3,500 vacancies around the world, we’ve established the sales organizations in our largest markets. We will start to engage externally very shortly to execute on outcome, and this could be through an IPO, through a sale, or partnership," said Jope.
In-home eating
"Foods and refreshment continue a strong growth trajectory with underlying sales growth of 8.1% in the second half (5.8% from volume, 2.3% from price)," noted Unilever CEO Alan Jope.
Despite seeing declines in Q2 2021 when compared to last year's spike in sales, in-home eating continues to be a strong trend for many consumers who have grown used to the routine of cooking at home, he said.
In the US, 55% of Americans are saying that they’re cooking more at home now and over 50% say they will continue to do so even in a post-COVID world, according to the company.
In North America, Jope commented that brands such as Knorr (the second largest brand in Unilever's portfolio) and Hellmann's grew significantly in the first half of the year.
"Hellmann’s grew double digits as it communicated its purpose to 'make taste, not waste'. Our vegan variants performed particularly well," said Jope.
Sales of ice cream brands including Magnum and Ben & Jerry's grew by double digits in both in-home and out-of-home channels supported by increased marketing efforts which had been temporarily put on pause due to the pandemic, noted Jope.
"Our collaboration with singer-songwriter Miley Cyrus, delivered our highest ever brand engagement for Magnum," he said.
Functional nutrition
Functional nutrition, which includes Unilever's VMS (vitamins, minerals, & supplements) and its functional drink brands, continues to be a strong performer within the company's broader CPG portfolio.
The company's functional nutrition portfolio grew by 9% in H1 2021, which doesn't account for acquisition of a few high-growth brands, noted Jope.
"Some of our recent acquisitions like Liquid I.V. and Smarty Pants haven’t yet dropped into our reported USG numbers because we haven’t had them for more than a year. If these brands were included, functional nutrition like for like growth would be over 30% in the half," he said.
E-commerce: 'We don't see this trend reversing'
The growth of consumers shopping more online for their everyday needs has had a permanent impact on Unilever's business, said Pitkethly.
"E-commerce grew 50% in the half, and now makes up 11% of total group turnover. We do continue to see strong growth for Unilever, and we don’t see this trend reversing as we exit the pandemic," he said.
