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Consumer goods leaders Unilever and Danone post strong Q3 sales as price hikes slow down, volume growth surpasses expectations as innovation surges

Unilever and Danone have succeeded in reclaiming shoppers after they capped price rises, which helped sales during the third quarter. Both firms surpassed expectations as they rolled along with slowing price gains that had forced consumers to seek cheaper alternatives during the inflationary streak.

During the pandemic, costs of freight and raw materials skyrocketed to the roof, and the war in Ukraine pushed grain and energy prices to new heights. Reacting to this position, Unilever, and Danone increased the price to maintain their margins. Consumers resorted to cheaper brands, owned by such retailers as Walmart, Tesco, or Carrefour.

Unilever said its underlying prices rose 13.3% at the peak of price hikes in the fourth quarter of last year, while nearly a 17% rise was posted by its home care business and ice cream businesses surged 14%. However, the company reported a sharp slowdown in price growth to just 0.9% in the third quarter of this year, while volumes surged by 3.5%. This was its greatest volume growth since the beginning of 2021.

The CEO, Hein Schumacher said that the business groups had offered positive and improved volume growth for a fourth straight quarter by citing “Each of our business groups has driven higher volumes year-on-year”. Dove soap, Comfort fabric conditioner, and Magnum ice creams were sold out in the highest volume.

Danone reported 3.6% sales volume growth in its third quarter and pressure on prices softened to 0.7%. The company reported that demand remains robust in North America for high-protein products, coffee creamers, and bottled water. Like Unilever, Danone topped analysts' estimates at 4.2% growth in like-for-like sales, above an estimated increase of 3.9%.

Unilever said underlying sales rose 4.5%, beating the forecast made on average by four analysts at 4.2%. The report is promising according to a portfolio manager at Waverton Investment Management, Tineke Frikkee, who said: “It's reassuring to see strong volume growth in most categories.” It's also spinning out its ice cream arm, Ben & Jerry's and Cornetto, as part of its turnaround strategy.

Danone gained 2% in early trading today and marked its fifth consecutive quarter of volume growth. A balance is sought between price increases and good sales volumes. Juergen Esser, finance chief of Danone, as Bloomberg states, told Bloomberg that “we see some inflation in our material costs moving forward.” What sets Unilever and Danone apart from most other competitors is their ability to manage the hikes in prices while they were still delivering sales growth amid elevated commodity costs.