Unilever said fallout from the US-Israeli war with Iran will add about €750m-€900m to its 2026 costs, forcing the consumer goods group to raise prices in select markets. The maker of Dove soap and Axe deodorant reported first-quarter underlying sales growth that beat analysts, driven by volume gains in beauty and home. Finance chief Srinivas Phatak told analysts the extra cost is roughly €350m-€500m higher than the company expected at the start of the year and that pricing will be used to help cover the shortfall. The group kept its 2026 sales and profit margin forecast unchanged and said most price moves will arrive in the second half, concentrated in home care.

Unilever put a number on the disruption. It now expects full-year cost inflation of about €750m-€900m. The company says higher logistics and factory costs are included in that range. Srinivas Phatak, Unilever finance chief, told an analyst call that roughly €350m-€500m of the hit was not in its original plan for the year.

That shortfall is the key reason Unilever plans to raise prices. "It may not be possible for us to just cover it from cost actions, so we will take pricing," Phatak said. "There will be frequent price increases but in small doses," he added. He said increases will show up in select markets and categories, notably home care, and mainly in the second half of the year.

Cost shock tied to Iran war

Unilever pointed to the US-Israeli war with Iran as a central driver of the new costs. The company said the conflict has pushed up commodity prices. It also said supply chains are being disrupted. Those moves raise shipping and factory costs for global manufacturers.

The firm isn't alone. Rivals from Nestlé to Procter & Gamble have warned of similar pressure. Reckitt has flagged margin strain.

L'Oréal beat expectations in its latest results, though, as shoppers bought more premium products.

For Unilever, the timing matters. The group raised prices sharply during the COVID-19 pandemic. It did the same after Russia's invasion of Ukraine in 2022. Those earlier hikes pushed some consumers to cheaper private labels. The company says it has been slowing the pace of increases and investing in marketing and product innovation to win shoppers back.

How Unilever will respond

Unilever kept its full-year sales and margin guidance for 2026 unchanged. That suggests management believes it can absorb part of the shock. It also signals a plan to use both cost savings and targeted pricing to protect profitability.

Mastheads

Management said price rises will be calibrated and competitive. Phatak said the approach would be to apply small, frequent increases rather than large one-off steps. He said the company will focus those moves where they make the most sense commercially, such as home care categories.

The group is already shifting how it grows. First-quarter underlying sales rose ahead of analysts. The improvement came from stronger volumes rather than heavy pricing. Unilever said its beauty and home businesses drove the volume growth. CEO Fernando Fernandez, who took the role last year, credited the company's Power Brands and early-year momentum.

Fernandez was promoted from finance chief with a mandate to speed up a multi-year reshaping. The company spun off its ice cream business last year. It also announced plans last month to separate its food division. Those moves narrow Unilever's focus toward personal care and beauty products.

Sector and consumer impact

Higher costs at Unilever are likely to ripple through the consumer goods sector. Many global brands face the same mix of higher commodity and logistics costs. Some companies will try to protect margins through efficiency measures. Others will pass costs on to shoppers as Unilever plans to do.

When brands raise prices, shoppers change behaviour. During past waves of inflation, customers switched to private labels and lower-priced options. Unilever itself saw shoppers move away after earlier rounds of price rises. The company says it has recently regained some customers by slowing price increases and investing in products.

Companies and retailers also watch energy and oil. The source of Unilever's new costs includes pressure on freight and factory energy. If oil prices stay elevated, household budgets could feel more pressure. That, in turn, could soften demand for fast-moving consumer goods.

At the same time, Unilever's decision to keep 2026 forecasts steady shows management thinks demand can hold up. The switch back to volume-led growth suggests the company sees room to rebuild market share by focusing on core brands and product development.

Economic and political implications

Unilever's move ties corporate strategy to geopolitics. The company is explicitly linking higher costs to the war involving Iran. That shows how regional conflicts can translate into global inflationary pressure. Global supply chains mean a conflict in one region can raise costs for producers worldwide.

For governments and policymakers, higher consumer prices raise questions about inflation and living costs. Central banks watch broad price data and corporate pricing behaviour. Higher consumer-goods prices can influence measures of core inflation. Those changes then feed into monetary policy choices.

Firms in the sector may also face political scrutiny at home. Lawmakers often react when global price shocks widen into higher grocery bills. Companies that pass on costs can face criticism, while those that cut margins risk weaker profits and investor backlash.

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Srinivas Phatak said the company will apply "frequent price increases but in small doses," mainly in home care and mainly in the second half of the year.

This article was created with AI assistance.