Get set for more price hikes: Unilever chief

Unilever expects to grow its margins in emerging markets, including India, even as the fast moving consumer goods sector battles with an unprecedented rise in raw material costs.

The growth in margins would be chiefly led by more price increases and operational cost cutting measures to make Unilever slimmer and more efficient. The company had in August 2007 revealed a plan to cut a further 20,000 jobs globally over the next four years.

"Prices for food commodities and energy are stubbornly high. For example, who would have expected crude oil to touch the $109 level even a few months back? That is bound to have some knock-on effects. But we will not sacrifice our margins and market share," Patrick Cescau, Group CEO of Unilever, the Anglo-Dutch parent of Hindustan Unilever (HUL), said here today. "We have to grow as fast as the markets we are operating in grow," he said.

Cescau, who is on his third visit to India in as many years, told reporters here today he sees no drop in demand for the company's products even as their retail prices go up.

Unilever's operating margins have remained more or less unchanged at around 13 per cent but it is targeting a margin in excess of 15 per cent by 2010.

Increase in prices of products contributed 50 per cent to Unilever's growth in sales globally and in HUL this year.

The other four ways that the company has employed to counter escalating cost pressures are: changes in formulations through innovation, smart buying of raw materials, group restructuring and optimising supply chain efficiencies. The company is expected to save 2.5 billion euros through these measures.

Cescau said margins were not just about costs and prices but also depended a lot on the mix of product portfolio. Unilever is also developing products which offer a higher value proposition in the premium range, an example being Pond's Age Miracle.

Unilever's dominant market share in emerging markets like India will help, he said. More than 44 per cent of the company's sales now come from emerging economies, compared with 38 per cent when Cescau took over. And the company is planning to increase it to 50 per cent by 2010.

The company would keep foods a priority in India and D&E through the brands Lipton, Knorr and Kwality. However, the biggest category in terms of sales in D&E is personal care, with 50 per cent of the share in its revenues here.

"Our aim here would be to increase the pie more than fighting for the share of an existing pie," Cescau said.