Unilever will launch 29 ecommerce hubs to win 'channel of the future'

​Inflation outlook

As one of the world’s largest consumer goods companies, Unilever has a unique vantage point into how inflation is sweeping around the world

It was among the first major companies to recognize costs going up, even before the invasion of Ukraine. Looking forward in 2023, Jope said the company is not expecting to see a deflationary environment in the second half of the year. However, he allowed that there are “a wide range of potential outcomes.”

In particular, the company is keeping an eye on two key “bellwether” areas for inflation trends. Jope shared the following:

China reopening. After COVID closures, China has $1.5 trillion-2 trillion in excess household savings. That’s leading to a “consumption boom” in China as reopening moves across the country. Travel bookings and cinema occupancy are leading indicators, and Unilever is watching closely to see how that will extend into demand for consumer goods.

Soy crop yields. Commodity pricing is a key driver of inflation. If companies have to pay more for raw materials, that drives manufacturing and supply costs up, which in turn get passed onto the consumer in the form of price increases. Soy crop yields are particularly affected by weather, and have a “knock-on effect” to palm and other crops, Jope said. So they are a leading indicator of supply costs. Unilever is paying close attention to spot pricing and trends so that it can adjust contracts accordingly.

While it monitors conditions for future change, inflation remains a very present concern, and Unilever is continuing to raise prices. In 2022, it raised prices 11.3%, and the fourth quarter increase pushed even higher to 13.3%. This comes with consequences, as the volume of units sold declined by 2.1% for the year. Margins at the company also declined, as Unilever opted not to pass on the full costs wrought by inflation to consumers.

For executives, the task is to balance each of these concerns, while still investing in initiatives such as the ecommerce hubs to spur growth over the long-term.