Conflict in the Middle East is escalating costs from oil prices to supermarket shelves. On April 30, global consumer goods giant Unilever announced that due to the Iran war driving up commodity prices and supply chain costs, the company will increase prices on some products. The price hikes will focus on home and hygiene care categories and are primarily scheduled to take effect in the second half of the year.

Unilever's Chief Financial Officer, Srinivas Phatak, stated during an analyst call that the increases will be implemented "multiple times, but with small increments each time." He added to reporters that if inflationary pressures persist, the increases could reach the higher end of a 2% to 3% range.

Simultaneously, Unilever reported first-quarter underlying sales growth of 3.8%, surpassing analyst expectations of 3.6%. The company maintained its full-year sales and profit margin targets.

The pricing strategy involves targeted increases in specific markets and categories. The hikes will be concentrated in particular markets and product lines, especially home and hygiene care products with significant exposure to crude oil, and are mainly planned for execution in the second half of the year. Geographically, the increases will be most pronounced in Asia, Africa, and Latin America—markets experiencing the strongest inflationary pressures. The impact on the North American market is expected to be relatively limited due to Unilever's smaller home care business presence there.

Phatak emphasized that the "price increases will be targeted and rolled out in a competitive manner." This statement reflects practical considerations. Following significant price hikes during the COVID-19 pandemic and the Russia-Ukraine conflict, where cost pressures were passed on to consumers, Unilever saw many shoppers switch to cheaper private-label brands. The company subsequently spent years slowing price increases and boosting marketing investment to gradually win back customers.

Chris Beckett, a consumer staples analyst at Quilter Cheviot, an investor in Unilever, noted, "They are constrained in many markets, particularly the developed markets in Europe. There's a limit to what they can do—raising prices is not easy."

Cost pressures are exceeding initial forecasts. Unilever anticipates total cost inflation for the full year will reach between 750 million and 900 million euros (approximately $876 million to $1.05 billion), which includes higher logistics and factory operating costs. Phatak stated, "This will be about 350 million to 500 million euros higher than our expectations at the start of the year."

This gap is attributed to the ongoing impact of the Iran war on oil supply chains. Home and hygiene products like laundry detergent and cleaning supplies heavily use petrochemical ingredients derived from crude oil. Disruptions to shipping routes through the Strait of Hormuz have directly increased the cost of these raw materials.

Phatak explained, "The Middle East crisis creates uncertainty, making the outlook more challenging. For us, inflation is not a single number. While everyone watches crude oil, it's actually more complex because there are many derivatives linked to it." According to reports, Unilever's cost projections are based on an assumption of crude oil prices remaining around 100 euros (approximately $115) per barrel.

Despite rising cost pressures, Unilever's first-quarter performance exceeded expectations. The company's 3.8% underlying sales growth was primarily volume-driven—with strong performance particularly in Beauty & Wellbeing and Home Care—rather than relying on price increases. This marks a return to a volume-led growth model after years of price-driven growth.

CEO Fernando Fernandez said in a statement, "We have had a good start to the year with volume-led growth, positive momentum from our core brands, and positive growth across all business groups." Core brands include Dove, Axe, and Dermalogica.

However, as price increase plans are implemented in the second half of the year, whether sales volumes can remain resilient will be a key focus for the market. According to a review of over 200 corporate statements, 36 companies have signaled price increases since the outbreak of the Iran war. Unilever's competitors, including Nestlé and Procter & Gamble, have also warned of rising costs, while Reckitt has indicated margin pressures.