Middle East turmoil drives up costs! Consumer giant Unilever is set to raise prices.

Middle East conflict is spreading 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 raise prices on some products, with the price increases focused on home care products, primarily taking effect in the second half of the year.

Unilever CFO Srinivas Phatak said during an analyst conference call, "There will be multiple price increases, but each increase will be small." He added to reporters that if inflationary pressure persists, the increase could reach the high end of 2% to 3%.

Meanwhile, Unilever's underlying sales in the first quarter grew by 3.8%, outperforming analysts' expectations of 3.6%, and the company is maintaining its full-year sales and margin targets.

Pricing Strategy: Price increases focused on specific markets and product categories

Unilever has a clear plan for the pace and scope of this round of price hikes.

Price increases will focus on specific markets and categories, especially home care products with larger exposure to crude oil, mainly to be implemented in the second half of 2026. Regionally, Asia, Africa, and Latin America will see the most significant increases—these markets face the greatest inflationary pressures; the North American market will be relatively less affected, as Unilever's home care business there is smaller.

Phatak stressed, "The price increases will be targeted and implemented competitively."

There are practical considerations behind this statement. After COVID-19 and the Russia-Ukraine conflict, Unilever substantially raised prices and passed the cost pressure to consumers, resulting in many consumers switching to cheaper private label brands. The company then spent years slowing down the pace of price increases and ramping up marketing efforts to gradually win consumers back.

Chris Beckett, a consumer staples analyst at Unilever investor Quilter Cheviot, said, "They're constrained in several markets, especially developed European markets. There's only so much they can do—raising prices isn't easy."

Cost pressure exceeds expectations

Unilever expects total cost inflation for 2026 to reach 750 million to 900 million euros (about $876 million to $1.05 billion), including higher logistics and factory operating costs.

Phatak said, "This will be about 350 million to 500 million euros higher than our expectations at the beginning of the year."

Behind this gap is the continued impact of the Iran war on the oil supply chain. Home care products such as laundry detergent and cleaning supplies use large amounts of petrochemicals derived from crude oil, and the blockage of the Strait of Hormuz has directly pushed up the cost of these raw materials.

Phatak explained, "The Middle East crisis has created uncertainty and made the outlook more challenging. For us, inflation isn't a single number. Although everyone is watching crude oil, it is actually more complicated because there are many derivatives linked to crude oil."

According to Fortune, Unilever's cost calculation is based on the assumption that oil prices will remain around 100 euros (about $115) per barrel.

Q1 sales exceeded expectations, but the era of price hikes may return

Despite rising cost pressure, Unilever's first-quarter performance was better than expected.

Underlying sales for the company in Q1 grew by 3.8%, outperforming analysts' expectations of 3.6%, and the growth was mainly driven by volume—especially strong performance from beauty and home care businesses—rather than relying on price hikes. This marks a return to volume-driven growth after years of price-driven growth.

CEO Fernando Fernandez said in a statement, "We had a strong start with volume-driven growth, and our core brands performed well, with all business segments recording positive growth." Core brands include Dove, Axe, and Dermalogica.

However, as the price hike plans are implemented in the second half of the year, whether sales can remain resilient will be a core concern for the market.

According to a Reuters review of more than 200 company statements, since the outbreak of the Iran war, 36 companies have signaled price increases. Unilever’s competitors such as Nestlé and P&G have warned of rising costs, and Reckitt has also noted margin pressure.

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