Unilever and Danone Surpass Sales Expectations

By Richa Naidu and Dominique Vidalon
LONDON/PARIS (Reuters)

Consumer goods groups Unilever (LON:ULVR) and Danone have exceeded third-quarter sales estimates by slowing price hikes and investing in innovations to attract shoppers back from cheaper brands amid rising inflation.

The COVID-19 pandemic increased the costs of freight and raw materials, while grain and energy prices surged following Russia's invasion of Ukraine in 2022. To safeguard their margins, the packaged food industry, including Unilever and Danone, raised prices.

As a result, consumers began opting for cheaper alternatives, including private label brands from Walmart (NYSE:WMT), Tesco (OTC:TSCDY), and Carrefour (EPA:CARR).

In the fourth quarter of 2022, Unilever's prices peaked with a rise of 13.3%, including increases of nearly 17% in home care and 14% in ice cream products.

Conversely, Unilever reported only a 0.9% rise in underlying third-quarter prices, with volumes up 3.5%, marking the largest increase since Q1 2021. Analysts had predicted a 1% price increase and a 3.2% rise in volumes.

CEO Hein Schumacher stated, "We have delivered a fourth consecutive quarter of positive, improved volume growth, with each of our business groups driving higher volumes year-on-year," highlighting strong performances in Dove soap, Comfort fabric conditioner, and Magnum ice creams.

Danone also surpassed sales expectations with a sales volume increase of 3.6% and price hikes slowing to 0.7%, driven by strong demand for high-protein products, coffee creamers, and waters in North America.

Both companies maintained their 2024 forecasts. Unilever reported a 4.5% rise in underlying sales, exceeding analysts' 4.2% expectation.

Tineke Frikkee, portfolio manager at Waverton Investment Management, commented, "It is reassuring to see strong volume growth in most categories," and emphasized the significance of a good ice cream result as Unilever prepares to divest this division.

Danone, known for Activia yogurt, Evian water, and Aptamil infant milk, reported a 4.2% rise in third-quarter like-for-like sales, surpassing analysts' expectations of a 3.9% increase.

Thursday marked Danone's fifth consecutive quarter of sales volume growth and Unilever's fourth. However, not all consumer groups have managed to curtail price increases; some are still dealing with elevated commodity costs, like coffee and cocoa. Last week, Nestle, known for Nescafe and Kit Kat, downgraded its full-year organic sales growth forecast to about 2% due to weaker-than-expected sales growth over nine months.

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