Unilever to hike prices in ‘small doses’ as Iran war threatens to hit shoppers

By Yadarisa Shabong and Richa Naidu

April 30 (Reuters) – Unilever said on Thursday it would raise prices to soften the hit from higher-than-expected costs driven by the Iran war, even as it reported first-quarter underlying sales growth ahead of analysts’ forecasts.

The London-listed maker of Dove soap and Axe deodorant, which has a market valuation of more than $120 billion, kept its 2026 sales and profit margin forecasts unchanged, indicating it hopes to weather the heightened economic uncertainty.

Consumer goods companies are navigating one of the most challenging cost environments in years due to surging commodity prices and supply chain disruptions from the U.S.-Israeli war with Iran that are making everyday products more expensive.

Unilever said it expects full-year total cost inflation of about 750 million to 900 million euros ($876 million to $1.05 billion), including higher logistics and factory costs.

“That will be about 350 to 500 million euros higher than our prior expectations when we began the year,” finance chief Srinivas Phatak said.

“There will be frequent price increases but in small doses,” Phatak said on an analyst call. He later told journalists that if the inflation pressure continued, Unilever could potentially raise prices at the higher end of 2% to 3%.

PRICE INCREASES IN SELECT MARKETS

The last time Unilever raised prices by 3% was in the final quarter of 2024, when it was still coming down from highs it hit in the wake of the COVID-19 pandemic and Russia’s invasion of Ukraine.

The increases will be in select markets and categories, notably crude oil-exposed home care, and mainly take effect in the second half of the year, Phatak added. He said parts of Asia, Africa and Latin America – where most of the inflation has been – will see the highest price increases, rather than North America, where Unilever’s home care business is smaller.

“It will be calibrated and it will be done in a competitive manner,” he said.

Chris Beckett, consumer staples analyst at Unilever investor Quilter Cheviot, said Unilever must raise prices in a way that will still help it drive sales volumes.

“They’re constrained in a number of markets, particularly developed markets in Europe,” Beckett said. “There are limits to what they can do – it’s not easy to take pricing.”

According to a Reuters review of more than 200 company statements since the start of the war, 36 companies have signalled price hikes due to the conflict.

Unilever rivals from Nestle to Procter & Gamble have warned of higher costs from the Iran war, with Reckitt flagging margin pressure, though French rival L’Oreal beat expectations as shoppers bought more premium products.

HOME AND BEAUTY BRANDS DRIVE SALES GROWTH

Companies are also grappling with the possibility of softening demand as household budgets could get squeezed if oil prices remain elevated and the conflict drags on.

After the pandemic and Russia’s invasion of Ukraine, Unilever raised prices sharply, passing commodity cost increases on to consumers and alienating many in the process who turned to cheaper private label brands.

It has only recently started winning back shoppers by slowing the pace of price increases and investing in marketing and innovation.

The company’s sales growth in the first quarter was driven by stronger-than-expected volumes – particularly in its beauty and home business – even as pricing was softer than forecast, marking a shift back to volume-driven growth after years of relying on price hikes.

“We have started the year well with volume-led growth driven by our Power Brands and a positive performance across all Business Groups,” CEO Fernando Fernandez said in a statement, referring to its biggest brands including Dove, Axe and Dermalogica.

Fernandez was promoted to CEO from finance chief last year to hasten a years-long restructuring.

He is reshaping Unilever to focus on personal care and beauty after spinning off its ice cream business last year and announcing plans last month to hive off its food division and merge it with spice maker McCormick.

Unilever posted underlying sales growth of 3.8% in the three months to March, ahead of the 3.6% growth expected by analysts in a company-compiled consensus.

($1 = 0.8565 euros)

(Reporting by Yadarisa Shabong in Bengaluru and Richa Naidu in London; Editing by Mrigank Dhaniwala and Emelia Sithole-Matarise)