Unilever Says It Will Raise Prices, Citing Higher Costs

Announcement comes 14 months after the price rises that sparked the Israel's social justice protests.

Fourteen months after the price rises that sparked the social justice protests last summer, Unilever announced on Sunday it was raising prices for its products, a step that almost certainly presages a season of across-the-board hikes.

The fifth-largest food manufacturer in Israel, Unilever - which operates under various brand names including Telma, Knorr packaged soups and sauces, BagelBagel, 778 jams and jellies, and Vered Hagalil chocolates - said it planned to raise prices by 5% to 6% on average after the High Holidays.

Sources close to the company said no decision had yet been made on which items would be subject to hikes, but it will include a wide range of the company's products.

"It was clear that no one could raise prices before the holidays. As proof of that, the retail food chains said they weren't raising bread price under price supervision until after the holidays either," said one source, referring to the government's decision earlier this month to allow a 6.5% rise in the price of bread.

Unilever delayed raising prices in recent months even as its expenses rose, costing the company some NIS 40 million, the source said.

"For a long time Unilever absorbed the increasing costs of inputs and avoided price hikes. But we have reached the point where the company can't continue to do this," confirmed Angelo Trocchia, chairman of Unilever Israel. "In consideration of the consuming public, the price increase won't go into effect until after the holidays."

The company, a division of the British-Dutch consumer goods multinational, boosted prices most recently in May of last year, after rivals like Tnuva and Strauss acted first. Then, it boosted prices of mayonnaise and margarine by an average of 12%, chocolate candy by 4%, salty snacks by 6% and personal care products by 5%. In October, it reduced prices on some 22 products by an average of 10%, after the high price of cottage cheese set off the wave of social protests during the summer and protesters threatened to boycott food manufacturers.

This time around, Unilever chose to be the first to announce a price increase, even if it would come at the expense of negative media coverage and criticism.

"You have to understand that Unilever is an international company, and its CEO is Italian," Liora Birnhack-Marcus, CEO of Manamim Food Industries, a maker of confectionaries. "They cannot say to company [headquarters] overseas that they are profitable enough. They have to operate according to accepted business principles, and what guides them is achieving profitability for their shareholders."

Unilever said its energy costs have risen 14-15% in the past year, water by 27% and electricity by 33%. Prices for certain commodities have risen as the United States, China and many parts of Europe are suffering severe droughts. For example, corn has risen 60%, wheat by 50% and soy by 20%.

In addition, the higher price of oil has hiked up the price of plastic wrapping by 15%, while a weakening shekel has boosted prices for imported inputs across the board.

Nevertheless, Unilever's announcement aroused angry responses from social justice movements as well as from food retailers.

"I don't believe it when they say they have no choice," said an executive at one grocery chain. "The biggest companies are the ones that, in fact, can swallow the higher costs for inputs, the dollar and whatever. The big companies are earning big profits from lots of products. They're simply 'hitching a ride' on what's happening around the world.."

An executive at another supermarket chain said that Unilever "should have been the last one to raise prices, not the first." He said the multinational was the last to increase prices in 2011 while other companies like Osem retracted planned price hikes that year.

Food industry sources pointed the finger of blame at the government, which has allowed a rise in what people pay for price-controlled bread.

"Since [Prime Minister Benjamin] Netanyahu met with the heads of the big companies last week, we've been seeing a renewal of price hikes," said the protest group Israel is Dear to Us. "The increases aren't being caused by 'higher global commodities' prices,' but because the Industry, Trade and Labor Ministry allowed the price of bread to go up."