PG Tips and Cornetto maker Unilever warns prices will rise

The company behind brands such as PG Tips, Cornetto and Dove has said it will raise prices to cope with "elevated levels" of cost inflation which it expects to continue next year.

Consumer goods giant Unilever said that it had already lifted its pricing.

Unilever said this would continue across its global operations and within each of its product divisions.

The company reported a 2.5% rise in sales for the third quarter to 30 September.

Growth was supported by a 4.1% increase in prices while the volume of goods sold fell by 1.5%.

On Wednesday, the Office for National Statistics said that the UK consumer prices index (CPI) measure of inflation slowed to 3.1% in the year to September.

However, inflation is expected to accelerate in the coming months due to a rise in energy costs as well as continuing disruption to UK and global supply chains.

Unilever's chief financial officer, Graeme Pitkethly, said: "We expect inflation to be higher next year than this year."

'Balancing act'

It is not yet clear how Unilever's price rises will affect consumers. The company sells to businesses such as retailers, supermarkets and wholesalers who may or may not pass on higher costs to shoppers.

But Danni Hewson, financial analyst at AJ Bell, said Unilever was facing a "balancing act of not increasing prices so much that its products are no longer competitive".

"It is a real test of the strength of the company's brands," she said. "After all, will we really stick with branded soap at a materially higher price when there's an unbranded alternative sitting next to it on the shelf which is an order of magnitude cheaper?

"If enough consumers decide they can put up with a cheaper alternative then it would become a big problem for Unilever."

Unilever's brands include Simple skin care, Sure deodorant and Vaseline. It also produces Marmite, Ben & Jerry's ice cream, Hellmann's mayonnaise and Knorr stocks among many others.

Unilever said it expected its full-year sales to grow between 3% and 5%, but that its profit margin would be unchanged.

Earlier this week, the boss of the Food & Drink Federation warned that the hospitality industry, which includes restaurants and pubs, was seeing "terrifying" price inflation of between 14% and 18%.

Mark Derry, executive chairman of Brasserie Bar Co, which owns the Brasserie Blanc chain of restaurants and whose chef patron is Raymond Blanc, told the BBC that while trading was holding up well, costs were rising which means it would have to raise prices for diners.

Raymond Blanc, who holds two Michelin stars, is chef patron of Brasserie Bar Co

"There is an inevitable effect of all of this inflation and that is that we will have to try and put prices up," he said

"At the moment, we've tried very hard to hold them because obviously we've come out of a very, very serious problem over the last year and a half and doing our best to control it, but I cannot see how it is possible not to put prices up, frankly."

Kraft Heinz, known for its tomato ketchup and baked beans, recently warned that people will have to get used to higher food prices.

On Wednesday, food giant Nestle revealed that it had also increased prices, which rose by 2.1% in the third quarter.

The maker of Kit-Kats, Nescafé and Purina pet products, said prices had risen on the back of higher energy and raw materials costs as well as transport.

The Financial Times reported that Nestle's chief executive, Mark Schneider, said "inflation costs are rising faster than we can roll forward through pricing. The situation has not improved. If anything we are seeing further downsides compared to what we told you in the summer".