Unilever Reports Surge in Profits Amid CMA Scrutiny
The company behind popular consumer brands like Marmite and Magnum ice creams, Unilever, has announced a significant increase in profits. However, the UK’s competition regulator, the Competition and Markets Authority (CMA), is investigating whether shoppers are being charged excessive prices. Unilever’s net profits for the first half of the financial year rose by 20% to €3.9bn (£3.4bn). The company also reported underlying price growth of 9.4% for the second quarter, while sales volumes fell by 0.2%.
The CMA recently cleared supermarkets of making excessive profits but has now turned its attention to the supply chain, which includes companies like Unilever. Food and other producers have been raising prices since the end of the COVID pandemic, driven by higher energy, transport, and commodity costs linked to Russia’s invasion of Ukraine. The CMA will investigate whether suppliers to supermarkets have raised their prices too much, leading to excessive margins at the expense of consumers.
Supermarket Rows and Consumer Response
There have been several disputes between supermarkets and branded goods firms in recent times, with chains refusing to stock certain items temporarily due to the prices they were being asked to pay. This includes a well-publicized disagreement between Tesco and Heinz last year. In response to the increase in food inflation, shoppers have been opting for cheaper supermarket own brands. Unilever’s reported fall in sales volumes reflects this trend, although it reported rising sales by value in its main business groups, including nutrition and ice cream.
Unilever’s Outlook and Investor Expectations
Unilever forecasts that underlying sales growth for the full year will moderate to above 5%. The company had previously warned of price increases in the first half due to rising input costs but expects stability for the rest of the year. Unilever’s Chief Financial Officer, Graeme Pitkethly, stated that while inflation has peaked, there will still be significant pricing growth. However, investors may be looking for higher margins, as Unilever’s margins remain below pre-pandemic levels. Weak European sales are among the challenges the company faces.
Overall, Unilever’s profits have surged, but the company now faces scrutiny from the CMA regarding pricing practices. The outcome of the investigation will determine whether shoppers are being charged fair prices or if excessive margins are being generated at their expense.