Rising costs may hit smaller local Cos, says Unilever CEO Fernando Fernandez

Mumbai: Unilever CEO Fernando Fernandez said supply chain disruptions and higher crude-linked input costs could hurt smaller local rivals in India, potentially easing the intensity of price competition for most large consumer goods companies in one of their fastest-growing markets.


The maker of Dove soap and Surf detergent also warned that escalating geopolitical tensions and crude oil prices could raise costs across detergents and household products, particularly in emerging markets. Fernandez, during the company's earnings call on Thursday, said its supply chain is multi-polar and very resilient.


"We are seeing some shortage in some local players, particularly in India and Southeast Asia that can support our volumes, and it will make the passing of pricing easier in the future. We see growth opportunities in laundry powders," he added.

Calibrated Increases

As a result, Unilever expects the current inflationary cycle to eventually temper aggressive discounting and reduce the need for sharp price hikes by larger players, even as the company prepares calibrated increases in home and personal categories.

For the past few years, especially during the pandemic, homegrown local brands chipped away market shares from top consumer goods companies through deep discounting amid a lower commodity price cycle. Unilever chief financial officer Srinivas Phatak said it gained 400 basis points of share in body wash, while premium brands in personal care outperformed the Indian market. He expects local companies in India to struggle to absorb the cost pressure.

"Classically in a category such as home care, this actually works in our favour," Phatak said on an earnings call. "A lot of the local players get constrained both from a supply perspective as well as cash."

Growth in New Channels

Phatak said about half of Unilever's inflation exposure is concentrated in homecare, with 70% of that coming from emerging markets. The company expects total inflation of 750 million to 900 million this year, assuming crude prices average about $100 a barrel.

Unilever said pricing would rise gradually through the year, particularly in home care, but stressed it would avoid becoming uncompetitive. "There will be frequent price increases but in small doses," Phatak said. India is Unilever's second largest market by revenue and has seen premiumisation and market-share gains in detergents and body wash. The company said it has increased direct outlet coverage by about 200,000 stores and is seeing faster growth in newer channels such as quick commerce and modern trade.

The company also said new demand drivers such as modern trade and online channels were growing faster than the broader business and contributing disproportionately to growth in India. Fernandez said the performance was not driven by a single category or temporary factor, but reflected "fewer, bigger growth bets" and improved execution across channels.