Unilever aims to grow through volume, not price

Unilever’s half-year results showed a decline in pricing growth due to deflation in some markets. Instead, the company wants to grow through volume.

In Unilever’s half-year results, the multinational’s food segments saw a slight increase in volume growth, complementing its aim to let volume drive growth. Conversely, commodity deflation in some areas has seen Unilever reducing price growth significantly compared to previous years.

Uptick in volume​

Overall volume growth for the half-year was 2.6%, compared with a 2.2% volume growth in Q1​. According to Hein Schumacher, Unilever’s CEO, the company hopes growth to be driven by an improvement in volume sales.   

Nutrition, which in Q1 saw a decline in volume growth by 0.4%, has now reached a flat volume growth, with sales driven by ‘power brands’ Knorr and Hellman’s, collectively representing two thirds of turnover for the category.

However, growth in ice cream was ‘clearly below our ambition’, said Unilever’s COO Fernando Fernandez. It had an underlying volume growth of -1%, even more significant than the negative 0.9% underlying volume growth of Q1. Growth has been negatively affected by shortfalls in China due to tougher market conditions, and shortfalls in Europe due to poor weather at the start of the summer season. Unilever’s separation from ice-cream​ will be completed by 2025.

Europe also returned to volume growth from its -1.5% volume growth in Q1. Now, Europe has seen a volume growth of 0.5% in these half-year results.

The growth in prices for Unilever has also slowed due to the reversal of the commodities cycle, said Fernandez, with the moderate return of commodity inflation.

Unilever's results in numbers

-        Turnover was €31.1bn

-        Unilever saw an underlying sales growth of 4.1%

-        It saw a volume growth of 2.6%

-        Underlying operating profit increased by 17.1%

-        Nutrition saw an underlying sales growth of 3.2%, a 3.2% underlying price growth, and a flat volume growth

-        Ice cream saw an underlying sales growth of 0.6%, an underlying price growth of 1.6% and a -1% underlying volume growth.

Innovation growth ​

Unilever aims to focus on innovation. The company has increased capital in brand and marketing investment to 15.1% of turnover, or €0.7bn.

“When it comes to innovation, there we have made a bit of a change,” said Schumacher. “First of all, we want to make sure the average size of our innovations will double this year, so that means doing fewer, bigger and better.” Secondly, it aims to grow a ‘select set’ to platforms of more than €100mn.

A pricing deceleration?​

According to Schumacher, ‘pricing continued to moderate’ in the first half of 2024. Price growth has indeed decreased significantly.

In Q2 2024, pricing grew by 0.6% in ice cream and 2.2% in nutrition, compared with 11.8% in nutrition and 12.1% in ice cream in Q2 2023 (in Unilever as a whole, Q2 2023 saw an 8.2% compared with 1% in Q2 2024). Why is this?

“Where we have seen real commodity deflationary impact, we have adjusted price accordingly to give back to the consumers,” said Schumacehr, “and to focus on our competitiveness, and ensuring that volume-led growth story that we’ve talked about.” The company are even implementing negative pricing in some pockets of the business.

Much like Nestlé​, Unilever expects inflation to return to more ordinary levels after recent inflationary spikes. While Unilever has seen anomalies such as the increase in popularity of private-label brands, Schumacher suggests that things will ‘settle there a bit’ when inflation levels normalise.