Unilever’s second-quarter sales growth failed to meet forecasts as the consumer goods giant struggled to entice inflation-hit consumers with reduced prices.
Facing a prolonged cost of living crisis, companies like Unilever and Nestlé are finding it challenging to rebuild sales volumes. They are heavily relying on discounts and promotions to stimulate sales.
Unilever reported an underlying sales growth of 3.9%, falling short of the anticipated 4.2%. The maker of Magnum ice cream and Dove soap raised prices by only 1% in the second quarter, below the consensus estimate of 1.6%.
Nestlé, which also released its earnings on Thursday, downgraded its full-year sales outlook after price increases “came down faster than expected.” The company implemented a 2% price hike in the first half of the year, less than the expected 3%.
Unilever is undergoing significant restructuring to boost growth, including the separation of its ice cream business by the end of next year and substantial job cuts. The company plans to reduce about a third of all office roles in Europe by the end of next year.
“We continue to embed the growth action plan, doing fewer things, better and with greater impact,” said CEO Hein Schumacher. He noted that the productivity program and the separation of the ice cream unit announced earlier this year are “progressing at pace.”
“There is much to do, but we remain focused on transforming Unilever into a consistently higher-performing business,” Schumacher added.
Despite the challenges, Unilever maintained its sales growth outlook of 3 to 5% for the year, driven by increasing sales volumes. The company expects its underlying operating margin to be at least 18% for the year, exceeding expectations.
The conflict in Gaza has also impacted Unilever’s sales. In Indonesia, where the majority of the population is Muslim, sales fell by 7% in the second quarter. Indonesia accounts for about 4% of the group’s sales.
“Some consumers avoided the brands of multinational companies in response to the geopolitical situation in the Middle East,” Unilever stated.
Consumer confidence in China also affected sales, which fell in the mid-single digits, the company reported.
