Middle East impact raises costs! Consumer giant Unilever PLC Sponsored ADR (UL.US) is going to raise prices.

Middle East conflict is spreading from oil prices to supermarket shelves. On April 30, global consumer goods giant Unilever PLC Sponsored ADR announced that due to the increase in commodity prices and supply chain costs caused by the Iran war, the company will raise prices on some products, with price increases focused on household and personal care products, mainly in the second half of the year. Srinivas Phatak, CFO of Unilever PLC Sponsored ADR, stated during an analyst call, "We will increase prices multiple times, but the magnitude of each increase will be small." He also added to reporters that if inflation pressures persist, the increase could reach a high level of 2% to 3%. At the same time, Unilever PLC Sponsored ADR's first-quarter underlying sales increased by 3.8%, exceeding analysts' expectations of 3.6%, and the company maintained its full-year sales and profit margin targets. Price increase strategy: Price increases will be focused on specific markets and categories Unilever PLC Sponsored ADR has a clear plan for the pace and scope of the price increase. Price increases will be focused in specific markets and categories, especially household and personal care products with large exposure to crude oil, mainly to be implemented in the second half of 2026. Regionally, Asia, Africa, and Latin America will see the most significant increases - these markets have the greatest inflation pressures; the impact on the North American market is relatively limited, as Unilever PLC Sponsored ADR has a smaller scale in local household and personal care business. Phatak emphasized, "The price increases will be targeted and implemented in a competitive manner." This statement is based on practical considerations. Unilever PLC Sponsored ADR had significantly raised prices after the COVID-19 pandemic and the Russia-Ukraine conflict, shifting the cost pressure to consumers, which resulted in a large number of consumers turning to cheaper private label brands. The company then spent several years slowing down the pace of price increases and increasing marketing investment, gradually winning back consumers. Chris Beckett, consumer staples analyst at Unilever PLC Sponsored ADR investor Quilter Cheviot, pointed out, "They are constrained in multiple markets, especially developed markets in Europe. What they can do is limited - price increases are not easy." Cost pressures exceed expectations Unilever PLC Sponsored ADR (UL.US) expects total cost inflation for the full year 2026 to be between 750 million and 900 million euros (approximately 876 million to 1.05 billion US dollars), including higher logistics and factory operating costs. Phatak stated, "This will be approximately 350 million to 500 million euros higher than our initial expectations." Behind this gap is the continued impact of the Iran conflict on the oil supply chain. Household and personal care products such as laundry detergent and cleaning supplies use a large amount of petrochemical raw materials derived from crude oil, and the blockade of the Strait of Hormuz has directly raised the costs of these raw materials. Phatak explained, "The Middle East crisis has created uncertainty, making the outlook more challenging. Inflation is not just a single number for us. Although everyone is focusing on oil prices, in reality, it's more complex because there are many derivatives linked to oil." According to Fortune, Unilever PLC Sponsored ADR's cost calculations are based on the assumption that oil prices will remain around 100 euros (approximately 115 US dollars) per barrel. First quarter sales exceeded expectations, but the era of price increases may return Despite rising cost pressures, Unilever PLC Sponsored ADR's performance in the first quarter was better than expected. The company's first-quarter underlying sales increased by 3.8%, exceeding analysts' expectations of 3.6%, with growth being mainly driven by volume - especially strong performance in the beauty and personal care business - rather than relying on price hikes. This marks the company returning to a growth model driven by volume after years of price-driven growth. CEO Fernando Fernandez stated in a statement, "We have had a strong start to the year with volume-driven growth, our core brands are performing well, and all business segments have recorded positive growth." Core brands include Dove, Axe, and Dermalogica. However, as the second half price increase plan is implemented, the market will be closely watching whether sales can maintain resilience. According to a Reuters analysis of over 200 corporate statements, since the outbreak of the Iran war, 36 companies have issued signals of price increases. Unilever PLC Sponsored ADR's competitors such as Nestl, Procter & Gamble Company have all warned of rising costs, and Reckitt has also hinted at pressure on profit margins. This article is translated from "Wall Street Seen", written by Long Yue, edited by Li Cheng.