The maker of Flora margarine, Magnum ice-cream and Dove soap has become the first major food and consumer goods company to warn that prices could rise for UK shoppers as a result of Britain’s vote to leave the EU.
Paul Polman, chief executive of Unilever, said companies could be forced to increase the price of products to offset the fall in the value of sterling against the dollar and euro.
“Anybody who is importing things from Europe – raw materials, not only finished products – will have to eventually reflect that pricing because you not going to go down in profitability and go out of business,” Polman said.
The boss of Unilever, which also produces Lynx deodorant and Ben & Jerry’s ice-cream, said it was too early to tell which consumer categories would be the worst affected.
“The manufacturers decide pricing [the recommended retail price], Brexit alone doesn’t decide pricing. But if you have a 15% decline in your currency relative to the euro, then you have a higher cost base,” Polman said.
“So we need to look at that by categories. If you import products it is more susceptible than if you locally produce, it depends on the mix of ingredients that are in there.
“Before Brexit I was saying that if you have a brand like Ben & Jerry’s the prices goes up. Now we are sitting here, the currency has gone done 15%. Are we going to sell this at a loss in the UK? Most likely not. So someone has to pay for this [Brexit]. It is quite something.”
Unilever is one of the biggest companies in the world. It employs 175,000 people, including 7,500 in the UK across its headquarters in London, two research and development centres, and 10 factories.
Polman said the company’s UK investments were not immediately under threat, but warned that the uncertainty about the terms on which the country leaves the EU were “haunting” businesses and new investments had halted.
He added: “We have 10 factories here and many of them supply Europe. So if import barriers are going to be erected, that is going to be an uncertainty. Is someone going to make an investment decision when you have that uncertainty now, when you don’t know where you are going? Highly unlikely.”
Before the referendum, Polman and his predecessors, Patrick Cescau and Niall FitzGerald, wrote to Unilever’s staff to tell them that the company had benefited from the UK being in the EU and it would be “negatively impacted” by a vote to leave.
Polman, who is Dutch, said it was a “strange situation” in the UK because “people have have voted against something not fully understanding where they want to go”.
“We don’t even know what the direction is that the country is going to take. So that will be an enormous insecurity for many companies [looking] to invest in the UK. Other countries, particularly European countries, will benefit from that,” he said.
The company’s origins date to 1885 when William and James Lever created Sunlight, the world’s first branded and packaged soap for washing clothes. Unilever was formed in 1930 when Lever Brothers merged with the Dutch margarine maker Margarine Unie.
Polman was speaking as Unilever reported a 4.7% year-on-year rise in comparable sales during the first half of 2016. However, currency fluctuations, particularly in emerging markets, meant revenues fell 2.6% to €2.6bn (£2.2bn). Pre-tax profits rose 0.8% to €3.6bn.
