PepsiCo, Kellogg’s and McDonald’s Warn of Higher Prices to Offset Expenditures

With inflation pushing up prices, some of the biggest consumer brands have been passing on the input costs to consumers, the Financial Times reported Sunday (Feb. 13).

Executives say that with higher wages and savings, U.S. consumers have also been spending more, justifying the increases. PepsiCo, McDonald’s and Kellogg have all done this, citing higher labor, shipping and commodity costs, along with how the pandemic has affected supply chains.

McDonald’s raised menu prices by 6% in 2021, and both PepsiCo and Kellogg are looking at price increases due to inflation and the rising costs of products.

“U.S. businesses have managed to do something never before accomplished, which is to lump four years’ worth of price increases into one,” said David Rosenberg, chief economist and strategist at Rosenberg Research.

The shifts in cost illustrate the way the S&P 500 blue chip companies are likely to register net profit margins of 12.7% for 2022, which is an increase of the five-year 10.5% average.

The new pricing comes as inflation has jumped globally, per the report. There have been surging prices, along with rising doubt over the policies from the U.S. government. Consumer sentiment is also lower than it has been in years.

PYMNTS wrote recently that Chipotle also recently raised its prices, lifting them by 4%. That came out to a total year-over-year increase of around 10%.

Read more: Leaning on Loyal Customers, Chipotle Raises Prices at Nearly Twice the Rate of Inflation

Food price inflation for restaurant purchases was up 6% since Dec. 2020, per data from the United States Department of Agriculture’s Economic Research Service’s Food Price Outlook.

According to the company, the price hikes haven’t made a dent in customer loyalty yet.

“After we take pricing, we really do analyze what happens to transactions,” Chipotle CEO Brian Niccol said. “And the good news is, we have so much data now with our loyalty database that we’re able to understand, are there any behavioral impacts from what we’re seeing? And we see very little resistance there.”