Some of the world’s largest consumer goods makers are gearing up to increase prices in an effort to contend with increasing costs of raw materials.
According to a report from the Financial Times, consumer goods makers including Procter & Gamble and Unilever alerted shoppers recently to an upcoming price increase — and other consumer product makers including L'Oreal, Reckitt Benckiser and Kellogg will also raise prices due to the increased price of raw materials, noted the report. The Financial Times noted that it marks a change from earlier in 2018 when P&G had to cut prices on Gillette razors. “Inflation is growing and is here to stay,” said Cecile Cabanis, Danone’s chief financial officer, at an investor event last week covered by the Financial Times. She said the company was gearing up to make “targeted price increases.” The paper noted that the industry’s willingness to raise product prices shows that inflation on the global stage is starting to increase, which will place more financial burdens on households. In the U.S., everyday item prices are only rising slightly and only on a limited amount of products including tin foil, waxed paper, and infant inserts.
The report noted the consumer goods makers could risk losing customers if higher prices prompted them to switch to generic brands which have lower prices. Analysts told the FT that while rising prices are good for the industry, it may not be enough over the longer haul to say the industry is overcoming structural problems. James Targett, analyst at Berenberg, told the FT it’s not time to bust open the champagne. “The long-term trend of pricing being difficult has not suddenly gone away,” he said. Still, the executives argue that most of the price increases haven’t made their way to store shelves yet. “The pricing that we need to implement to offset commodity and foreign exchange cost is largely not in the marketplace today — there’s very little of it that’s actually on the shelf,” said Jon Moeller, chief financial officer of P&G, according to the FT.