Big companies continue to brag to investors about price increases
- Labor and supply chain challenges have increased costs for businesses selling consumer products.
- Many have succeeded in passing these costs on to consumers in the form of higher prices.
- In recent earnings calls, some have boasted of their ability to charge more without losing sales.
Consumer products companies – the ones that make most of the products we buy on a daily basis – are posting strong profits this earnings season, even as labor and supply chain challenges make matters worse. dear.
Prices for businesses have risen more than 8% in the past year, according to the US Bureau of Labor Statistics, adding pressure to their results.
But strong customer demand allows many companies to focus their attention on high-end products and offer fewer discounts and offers, as buyers have shown their willingness to buy what is available.
Yet there’s an even simpler reason why corporations have been able to take the hit and keep shareholders happy: They make you pay more.
As companies have announced their third quarter results in recent weeks, several have seemed to brag about their ability to access your portfolio without scaring you.
“What we’re very good at is pricing” Colgate-Palmolive said CEO Noel Wallace. “Whether it’s exchange rate inflation or raw material and packaging material inflation, we’ve found ways over time to get that back within our margin.
Unilever, which owns an impressive number of mainstream brands, said that although the number of sales had declined slightly in several of its main segments, it was still able to increase its profits by increasing its prices by around 4% to 5%.
“The price to the consumer is the last lever we normally use to manage inflation,” Unilever CFO Graeme Pitkethly said, before describing how they did it: “We find that taking several small price increases is more effective than a big price jump. “
Proctor and Gamble also successfully launched a series of price hikes during the quarter that only the most observant customer might have noticed.
“We haven’t seen any significant reaction from consumers,” said P&G CFO Andre Schulten. “So it makes us feel good about our relative position.”
Some of the retailers that sell many of these companies’ products have also weighed on their ability to pass the buck.
“We are very comfortable with our ability to reflect the increases that we have seen at this point”, Kroger’s CFO Gary Millerchip said. “And we would expect that to continue to be the case.”
However, Keurig Dr Pepper admitted raising prices, but said the company had little choice.
“We try to keep prices low,” said CEO Robert J. Gamgort. “We are just passing on the costs of coffee because they are excessively high.”
“We have relied on productivity because it is available to us so much more than pricing because it is the right thing to do for the Keurig ecosystem,” he added. “I recognize that the concept is a very different concept from traditional CPG.”
One of the main reasons businesses are successful with these hikes is that a lot of them are. If only Unilever was charging more, that could cause buyers to choose an offer from Colgate-Palmolive or P&G.
When they all do, you have no choice.
So far, federal economic assistance has helped offset the impact of these new costs on American households, but most of these programs ended over the summer.
The next few months are likely to bring even more price increases, the companies said, which means even more pennies and dimes on paper towels and toothpaste.