From Kisses to Kleenex, consumer product makers plan further U.S. price hikes

From Hershey’s to Clorox to Kleenex maker Kimberly-Clark, major consumer products companies have announced plans to raise prices in the United States more or more than what was proposed this year, signaling that the fastest rate of inflation in a generation may not come down anytime soon.

Product manufacturers usually talk to US retailers at year-end about planned price increases for the following year. But company executives revealed in recent quarterly results that they are taking a more aggressive approach this year to protect margins.

Clorox said late Thursday that it plans to raise prices for 85% of its products by the end of June, up from 70% previously planned, with some of the company’s brands set for multiple rounds of price increases.

Chief Financial Officer Kevin Jacobsen said his executives are “having conversations with retailers” about additional price increases taking effect over the next two quarters, beyond those previously disclosed in October.

“We are ready to take more price (action) if necessary,” Jacobsen said. “We want to see how inflation plays out in this fiscal year,” which ends June 30, 2022.

Chocolate maker Hershey said it would raise prices further in the first half of 2022 in the United States in addition to price increases that will take effect in the first quarter ended March 31, 2022. Its executives did not quantify the price increases . Hershey also said it expects its gross profit margins to fall in 2022 despite its new price increase plans.

Kimberly-Clark said last week it would make further price increases – after four rounds of price increases in 2021 – as pulp, labor and transport costs continue to bite .

Consumer packaged goods companies have also reduced some of the discounts they offer to consumers, adding to the effect of price increases.

Food items such as frozen snacks and chilled meals saw the biggest drop in promotions offered to customers in the week ending January 23 compared to a year ago, according to an index from the analytics firm IRI data.

“With supply constraints, there’s no point in promoting,” said Krishnakumar Davey, president of customer engagement at IRI. “Promotions have gone down a bit since COVID.”

Supply and demand imbalances caused by the pandemic have driven up the prices of everything from Big Macs to household staples, sending the US inflation rate soaring in 2021 to its fastest pace. fast for nearly four decades.

Comments from executives on post-earnings calls show companies are grappling with higher costs on nuts and vegetable oils, surfactants and plastics as global supply chain issues persist. Transport and labor costs are also on the rise.

The average adjusted operating margin of the eight largest publicly traded U.S. beverage companies fell to 25.7% in 2021 from 26.4% in 2020, according to Citi. Among major U.S. household products companies, average pretax margins fell to 19.4% in 2021 from 19.6% – with Kimberly Clark, Clorox and Colgate-Palmolive all seeing their margins hit. Among food companies, average margins fell to 17.2% from 17.3%, with Kraft Heinz, McCormick & Co and Campbell Soup all seeing lower margins.

At Clorox, Jacobsen described an “extreme level of cost inflation.” The bleach maker cut its full-year profit forecast and said it expects its annual gross margin to decline by about 750 basis points.

“I think it will take us several years to rebuild the margin (to pre-pandemic levels),” Jacobsen said in a call with analysts.

Last month, maker of Cadbury Chocolate and Oreo cookies, Mondelez International, revealed there could be “several price waves” this year to keep up with inflation. Colgate said it was accelerating a series of price increases in the first half instead of the second half.

Colgate CEO Noel Wallace said sales volumes will “fall” when shoppers realize they have to pay more. He said the declines will be seen by all companies and in all categories, not just Colgate.

Food companies McCormick and General Mills also signaled this week that they expect consumer sensitivity to price changes to increase in the coming months.

At Procter & Gamble, executives said they have notified retailers of planned increases for fabric care products like Tide detergent and Downy dryer sheets that take effect Feb. 28. In mid-April, the company plans to raise prices for some of its personal health care products. products, they said.

So far, the consumer goods giant has not lost market share where it has implemented price increases, executives said. Despite commodity-driven price hikes, shoppers opted for more expensive Tide pods over its cheaper liquid detergent.