Consumer goods prices rise as manufacturers face higher costs

Consumers are feeling the pressure on their wallets as they pay more for their weekly groceries.

The prices of commodities like milk, coffee and shampoo are on the rise, and the multinational conglomerates that produce them, like Danone, Nestlé and Procter & Gamble, attribute the increase in costs to supply chain disruptions linked to the pandemic.

The higher bill at the checkout comes as overall consumer prices rose sharply in 2021, soaring 5.4% in September from the previous year. Food and furniture costs have risen, and Federal Reserve officials have signaled that if inflation remains high, the central bank may need to act to ensure price increases do not become permanent.

Other companies are expected to follow suit by raising their prices as inflationary pressures continue, said Laura Veldkamp, ​​professor of finance at Columbia University’s Graduate School of Business.

Demand for some products eased during the pandemic, “but now we’re back to commerce,” Ms. Veldkamp said. “The fact that companies are raising prices is a normal course of events.”

Nestlé on Wednesday became the latest consumer goods maker to say consumers should expect price increases in the coming months. In its quarterly financial performance report, Nestlé attributed the rising costs to supply chain constraints. “We expect higher input cost inflation,” François-Xavier Roger, the company’s chief financial officer, said on a conference call.

The company’s dairy products, like Carnation milk and Dreyer’s ice cream, and pet care products, like Purina pet food and cat litter, were among the items most affected by rising costs in 2021. Nestlé, the maker of Nescafé and Starbucks Coffee at Home, also said it expects coffee prices to rise in 2022.

Nestlé’s grim report follows a similar report from Procter & Gamble, which said on Tuesday it was facing higher costs for raw materials, transportation and freight. “We will offset some of these higher costs with price increases,” Andre Schulten, P&G chief financial officer, said on a conference call. “As these prices hit store shelves, we’ll slowly be monitoring consumer trends. “

He added that consumers should expect higher prices for oral and hair care products from P&G, whose brands include Gillette, Olay, Oral-B and Pantene.

Danone, the maker of Evian’s silk milks and water, also anticipated price spikes for the rest of the year. “What started out as rising material cost inflation has turned into widespread constraints affecting our supply chain in many parts of the world,” the company said in its quarterly earnings report on Tuesday. .

The companies also said labor shortages were slowing operations at warehouses and distribution centers, which reported some workers were sick with Covid-19 and others in quarantine. Supply chain issues arrive ahead of the holiday season, with major ports facing a staggering stack of cargo that shows no signs of abating.

Unilever, the maker of Ben & Jerry’s, Lipton and Dove, is expected to release its third quarter earnings report on Thursday as investors look for signs of continued price increases.

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