Unilever's price change may have attracted buyers in the third quarter By Reuters

By Richa Naidu

LONDON (Reuters) – Investors are looking Unilever (LON:) will publish third-quarter results on Thursday to see whether the consumer goods group has started to regain some of the market share lost to cheaper rivals as it looks to balance sales volumes and margins.

The packaged food industry, including Unilever, had to raise prices to cope with cost increases during the pandemic, while grains and energy became more expensive after the Russian invasion of Ukraine.

Shoppers began opting for cheaper alternatives, such as private brands owned by Walmart (NYSE , Tesco (OTC and Carrefour (EPA:).

At their peak in the fourth quarter of 2022, Unilever's underlying price increases were 13.3%, with prices in its home care business rising almost 17% and prices in its ice cream business around 14% more in that period.

“(On Thursday), we will look for the balance that Unilever is striking between volumes and prices,” said Tineke Frikkee, portfolio manager at Waverton Investment Management, a Unilever investor.

“They have lost market share to players who were charging lower prices; now that prices have normalised, it will be interesting to see whether volumes recover and whether this has resulted in an improvement in the competitive position.”

Unilever, in a turnaround attempt led by its CEO Hein Schumacher, also lost market share because it reduced its product range. But it has also launched new products, including Wonder Wash detergent.

The company is expected to report a 4.2% increase in underlying sales growth in the third quarter, driven by a 3.2% increase in sales volumes, with price increases of 1%, according to a average of analyst estimates, based on a consensus provided by the company.

Its larger rival, Nestlé, missed estimates for organic sales growth, reporting a nine-month price increase of 1.6%, lagging analysts' average estimate of 1.7%. Actual internal growth – or sales volumes – increased by 0.5% versus an expected increase of 0.8%.

Unilever's slower pace of price increases over the past year may have paid off in the third quarter.

A Barclays analysis of data from market research group Nielsen showed Unilever's U.S. food business gained market share in grocery stores each month in the third quarter, driven by mayonnaise and soup bases.

Unilever makes Knorr soup base and Hellmann's mayonnaise.

The company's market share in U.S. grocery stores rose 34 basis points in the four weeks ending July 13, 57 basis points in the four weeks ending August 10, and 28 basis points in the four weeks to September 7, according to Barclays analysis of the Nielsen data, which does not reflect all retail channels.

But Unilever's market share in household and personal care products sold in the United States plunged in the third quarter, as did Unilever's share of the European food market at times, the data showed.

Unilever declined to comment.

“Europe accounts for 20% of the group's sales, but has been responsible for 60% of Unilever's underperforming cells globally,” said Barclays analyst Warren Ackerman. It noted that Unilever's European home and personal care business had seen an improvement in its market share during the third quarter.

“The proof will be clear when earnings are reported, but if they are gaining share in the US market, that is clearly a good thing,” said Oberon Investments portfolio manager Jack Martin. “If they can do it without eroding margins too much, then that's good news.”