Retail

Prices Are Going Up To Cover Shipping Costs

Shipping — by road, sea, air or rail — is becoming more costly as operators across shipping routes push for higher margins. That push has left some of America’s larger retail players like General Mills and Tyson in a rather difficult bind, according to a recent Reuters article.

Such firms can either pay more for deliveries and see their own margins take a hit, or pass the costs to customers and risk alienating them with higher prices. There appears to be no universal agreement or consensus among impacted leaders or brands about the best way to handle the situation.

At least two of the 10 brands interviewed by Reuters noted they are going to raise prices by an undisclosed amount. A third wants to keep the retail price locked, but would like retailers to pay more.

The news comes as the U.S. Department of Labor began February reporting that underlying consumer prices in January posted their largest gain in more than a year. The economy is growing faster and stimulating demand for more shipping, and that pick up is coming as gas prices are on the increase as well — a factor which has driven up transportation costs.

Those costs could have some upward pressure power on items like cereal, chicken, sausage and many other consumer staples.

Tyson CEO Tom Hayes said the company’s price increases “should be in place for the second half” of its fiscal year. He also noted the brand is negotiating cost increases with retailers and foodservice operators in response to shipping costs up more than 15 percent.

General Mills informed convenience store and food service customers of price increases as well. CEO Jeff Harmening cited logistic costs and wage inflation as factors in an email on the topic.

“It feels to me like an environment that should be beneficial for some pricing,” Harmening said in a presentation at last week’s Consumer Analyst Group of New York conference.

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