Unilever is still paying for the decision to raise prices

About three weeks afterThe commercial dispute with Shufersal has endedthe damage suffered by Unilever as a result is revealed her demand for a price increase at a sharp rate of 15%. The Stornext data received by “Calcalist” shows that Unilever’s sales have dropped since the moment it announced, last September, that it intends to raise prices. The price increases went into effect in November. The company’s sales began to show a recovery only last month, after reaching an understanding with Shufersal and returning to operate in most of the marketing chains, but still have not reached their pre-crisis level.

According to the data, Unilever’s sales in September, during which it announced a price increase, fell slightly by about 2% compared to August, and amounted to NIS 132.4 million. However, already in October there was a more significant decrease of 8.6% compared to Unilever’s sales in August. At the height of the crisis, in December, Unilever’s sales plunged by 37.7% and stood at only NIS 84.1 million.

As a reminder, as part of the move, Unilever first raised the price of the krambo by 15%, which led to the fact that a significant number of chains stopped ordering the seasonal product from it. It can be estimated that part of the decrease in October sales was due to this.

On November 1, Unilever raised the prices of the rest of Unilever’s products, including breakfast cereals, Knorr’s cooking products, Thelma and Hellman’s mayonnaise, Click Ward HaGalil chocolate, Strauss ice creams, Bedin products, and Dove, Pinok, Rexona and Ax toiletries. As a result, Shufersal, and subsequently some of the major retailers, stopped ordering products from her.

Last January Shufersel reached an understanding with Unilever, within their framework initially returned its products to the ultra-Orthodox network Yesh Chesed, and two weeks later to all chain branches. It can be estimated that, as a result, Unilever recorded an increase in sales in January of about NIS 101 million, still about NIS 30 million less than its monthly sales before the conflict.

The corona epidemic that broke out at the beginning of 2020 led to a sharp jump in food market sales, which began to balance out only in the past year. Unilever’s sales in 2019, before the outbreak of the Corona epidemic, amounted to NIS 1.49 billion. In the following two years, they jumped to NIS 1.58 billion in 2020 and NIS 1.57 billion in 2021. In 2022, in which the business dispute with the chains took place, the company concluded with sales of NIS 1.5 billion. The monthly sales rate until the announcement of the price increase in September was about NIS 133 million. In relation to this figure, Unilever lost sales of approximately NIS 126 million since the announcement until the end of January 2023.

However, it can be estimated that the temporary injury paid off for the company, which succeeded in insisting on raising prices to boost the prices of its products by about 15%, which will ensure the improvement of its profitability.

Examining a number of categories in which Unilever has a central activity, shows that consumer habit and loyalty to its brands will make it easier for it to return to the sales volumes it had before the commercial dispute with Shufersal. In the breakfast cereal category, where Unilever last July captured 57.6% of sales through the Thelma brand, the market share shrank throughout the crisis to a low of 39.2% last December. The sales of the entire category suffered from the crisis: sales of the breakfast cereals of all the players fell by 21.3% to about NIS 45 million per month. The return to Shufersal shelves and other chains increased the company’s market share in January to 32.9% and in February already to 47.8%. This, while sales of the category began to climb in January to about NIS 50 million. The one who benefited from the commercial conflict was Assem, whose market share in the category rose from 25.7% in July to 34.3% in January. Unilever’s return to the shelves shrunk Asam’s market share this month to 29.8%.

In the chocolate bar category, where Unilever operates with the Click brand, the chains found it difficult to give up the company’s products. The reason for this is the absence of Strauss elite sweets, which only recently began to gradually return to the shelves after the salmonella crisis. Despite this, Unilever’s market share dropped from 34% in July to 19.6% in October. The return of Elite snacks led to the fact that Unilever’s market share continued to shrink even after the end of the commercial conflict with the marketing chains, and in the last two months it stood at only 17.7%.

In the mayonnaise category, where Unilever dominates by a considerable margin with Thelma mayonnaise and Hellman’s mayonnaise, its market share crashed from 70.5% in July to 48% in December. The return to the shelves led to an increase in market share to 60.3% this month, as mentioned, still far from the peak. In the fabric softener category in which Unilever operates with Badin, the market share was cut from 23.9% to 14.9% at the height of the crisis, and this month it rose to 19.1% of the category’s sales.

It can be estimated that Unilever’s insistence on raising prices despite the “chain boycott” was based on its experience in Israel, which teaches about consumer loyalty to its brands.

In 2006, the company faced a similar incident, when Effie Rosenhuis, then the CEO of Shufersal, demanded from Unilever an improvement in the terms of trade, and when he did not respond, he stopped the orders of its products for about two months. Unilever’s sales decreased, but after the parties reached an understanding, they gradually returned to the volumes they were Hold on to the conflict first.

A similar event also occurred in 2015then Itzik Abarkhan, who served as the CEO of Shufersal, managed a commercial dispute with Unilever for about two months, after which the parties reached an understanding. The products he put on the chain’s shelves and the company returned to market shares similar to those it held before the crisis. Also an unusual incident of salmonella contamination in Unilever’s Alofis cornflakes in 2016 It did not keep consumers away from the brand for long, and its market share even increased at the end of the crisis period.

However, the latest dispute is different, as it has caused some retailers to examine the necessity of some of Unilever’s products. Following the identification of some of them as low sales, which do not justify dedicating shelf space to them, they removed them from the assortment. This move may weigh on Unilever over time, as well as on the extent of its exposure on the shelves of the marketing chains.