Unilever Plc (NYSE: UL) drops in early trading session on Thursday as it provided that a bleak assessment of consumer mood in China and Europe, two of its important regions, but also increased its full-year sales projection by raising prices to offset rising expenses.

Since the commencement of the conflict in Ukraine, which has increased the price of energy and essential components, Unilever’s margins have been squeezed along with those of the rest of the consumer products sector. As a result, the corporation dramatically increased pricing.

Chief Financial Officer Graeme Pitkethly told reporters that consumer confidence in Europe is at an all-time low, prompting warnings of concerns about a “confluence of events,” including rising energy prices, inflation, and a decline in consumer savings.

With sales volumes down 1.6%, consumers paid 12.5% more for Unilever items in the quarter, a record price increase for the corporation. Sales growth for the third quarter was stronger than anticipated, according to the firm.

Pitkethly told media that “both the premium sectors of the market and the value segments of the market are really increasing very swiftly, at a similar rate.”

However, a cost of living issue brought on by inflation and the threat of austerity in some countries has caused a shift in consumer behavior toward less expensive alternatives, such as store private label items.

Utility, transportation, and food costs are taking up a larger portion of consumers’ budgets in Europe, and non-essential discretionary purchases are being reduced. More than 400 brands, including Ben & Jerry’s ice cream and Persil detergent, are produced by Unilever. Sales increased by 1% in China, Unilever’s third-largest market, where Covid-19 lockdowns have been intensifying.

Pitkethly stated, “The China number, 1%, was in reality a competitive performance in a Chinese market that is still somewhat suppressed by continuous lockdowns in China,” adding that trust in China is lower than usual and that Unilever was not as successful in raising prices there.

Oberon Investments, a stakeholder in Unilever, and fund manager Jack Martin described the results as “quite good, gratifying to see despite such a volatile earnings season overall.”

Volumes are a little off, but considering how much the price moved up and the state of the economy, he added, this demonstrated the portfolio’s robustness. Shares are trading flat in the morning, which shows that’s how the market is interpreting the situation.