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Unilever to see rocky future as price inflation continues, says GlobalData

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Following today’s news that Unilever’s Q3 results reported underlying sales growth of 2.5%, with 4.1% price and (1.5)% volume;

Carmen Bryan, Consumer Analyst at GlobalData, a leading data and analytics company, offers her view:

“Unilever’s focus on investments and divestments has really paid off, helping support the company through rocky waters. However, the price inflation of raw materials currently plaguing the industry will dampen the company’s success, impacting investor confidence in the long term.

“The company is particularly challenged by the inflationary pressures, as a sizable portion of its business is focused on ‘emerging markets’. The company will be forced to pass the costs on to the consumer. This will tighten Unilever’s margins over the next year, as many people worldwide are still under financial pressure following the COVID-19 health crisis. According to a survey by GlobalData, almost a third (30%) of consumers are extremely concerned about their personal financial situation. We expect budgetary measures such as cooking from home, rather than eating out, and DIY beauty regimes, instead of premium products, will be reinforced as people tighten the purse strings and cut down on non-essential expenses.

“On a more positive note, Unilever has reported an impressive performance in e-commerce, with the channel growing 38% to reach 12% of the company’s overall sales. This is no doubt helped by the acquisition of digitally native brand Paula’s Choice, enhancing its beauty portfolio, as well as strong e-commerce adoption. GlobalData’s survey also revealed that two in five (39%) people are still buying groceries online more often since the last three months. The threat of another COVID-19 wave in Europe will likely give e-commerce an immediate, albeit short-lived, boost in interest before settling to more moderate growth.

“Overall, Unilever has shown strong performance in core categories—from comfort foods to household essentials—that are well placed to benefit from pandemic trends. However, the company will want to strike a balance between a purpose-led business model and profits in order to keep investors and consumers happy in the coming year.”

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