Unilever Asia prices to rise on high oil costs

Unilever Asia prices to rise on high oil costs

Phelim Kyne, Dow Jones/Jakarta

Anglo-Dutch consumer product giant Unilever will have to increase prices in Asia to cope with high crude oil prices, a company executive said recently.

Products with petrochemical components, including laundry detergents, are likely to bear the brunt of those pending price increases, Unilever Asia Pte. Ltd. Group Vice President Tex Gunning told Dow Jones Newswires.

"All businesses around the world see that their chemical-based products costs are increasing and we're no different," Gunning said. "Some price increases have to be passed on at some point, like the airlines, like everybody else."

Unilever will implement "step-by-step...product-by-product" price increases, Gunning said, without providing specific details on the size or timing of those increases.

Even as the company plans price increases on personal care, household maintenance and food products, the maker of Surf detergent and Dove beauty products expects its sales to be insulated from damaging effects of those price rises.

"Our products are very basic products, so where is the consumer going to cut (purchases)?" Gunning said on the sidelines of the Asian Forum on Corporate Social Responsibility in Jakarta. "I don't think people will leave their laundry products or toothpaste products out (of their usual purchases) very quickly."

Indonesian consumers are likely to feel a bigger pinch than many of their Asian peers due to the pending elimination of fuel- price subsidies.

Despite the new pressure on consumers' wallets, however, Gunning said the fuel-price subsidy cuts will likely only hit Unilever's premium product line, which is "a small part of the business" the firm does in Asia.

The government is moving to eliminate the budget-crippling subsidies that could cost Rp 138.6 trillion (US$13.86 billion) this year because of record high oil prices.

Nymex October crude oil prices are up 4 cents from Monday's floor close to $63.88 per barrel at 01:28 GMT on Tuesday.

Fuel-price subsidies drained Indonesia's coffers of $7.4 billion, equivalent to 3 percent of gross domestic product, last year.

While the short-term impact of higher oil prices on Unilever's sales may be limited, the longer-term effects are more difficult to determine, Gunning noted.

"I think in the whole of the world, and in Asia particularly, we don't know what this whole (crude oil) price increase is going to mean," he said. "In previous oil crises...we've always seen 10 to 24 months later the effect of (them)."