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Get ready to pay more for some of the most utilitarian items on your shopping list.
Consumer-products giant Procter & Gamble Co, maker of Pampers diapers and Tampax tampons, said that it would hike prices on items in its babycare, feminine-care and adult-incontinence divisions to cushion the blow of rising costs for raw materials such as pulp. The announcement comes just weeks after Kimberly-Clark Corp, a competitor that offers brands such as Huggies diapers and Scott toilet tissue, said it plans price increases for the same reason. Both companies said customers should expect mid- to high-single-digit percentage increases.
P&G shares were little changed, which partly reflects that there’s little chance these moves will backfire. Because the new price tags are a response to an increase in commodity costs that is roiling the entire industry, it is likely that cheaper store brands will end up making similar adjustments. Plus, the items affected by this decision are ones that are true household essentials; you can’t just put off buying diapers for your baby until you see a price tag to your liking.
That said, these actions still serve as breadcrumbs for economy watchers looking for signs of inflation. They are also an important signal for other corporate behemoths about what kind of backdrop they are going to face when trying to get a piece of shoppers’ spending in the coming months.
As I noted earlier this year, consumer brands have been flexing pricing power throughout the pandemic on everything from shoes to peanut butter. Shoppers have not shown much resistance because amid the public-health crisis there was a perception of scarcity of certain items, and many people were prioritising safety and convenience over getting the best deal.
The result is that the packaged-goods industry has already benefited significantly from reduced discounting and a willingness by shoppers to spring for fancier items. In the four weeks, market research firm IRI reports there was a 5.1% increase from 2019 levels in edible items sold in stores and online. But sales revenue was up 16.6% from 2019, reflecting price increases and trade-ups. It’s a similar picture in nonedible consumer product categories:
P&G itself has already benefited from these dynamics.
—Bloomberg