Coke or Pepsi? Pampers or Huggies? You're Paying More Either Way
(Bloomberg) -- Coca-Cola Co. and PepsiCo Inc. are in a dogfight in the grocery aisle, but both have managed to raise prices. Same for Procter & Gamble Co., purveyor of Pampers, and Kimberly-Clark Corp., the maker of Huggies.
From detergent to tissue, bottled water to pet food, higher prices on consumer products have helped global giants beat analysts’ estimates for sales last quarter. It’s a sign that the hikes that rolled out last year to offset currency fluctuations and rising costs for raw materials like plastic and paper packaging are beginning to pay off.
In some cases, companies have tapped into changing consumer preferences by offering premium brands that cost more. You could feed your dog Nestle SA’s Purina Dog Chow ($20 for a 40-pound bag “with real lamb” on Walmart.com), or you could pay up for Purina One to make sure she gets more protein ($42 for a 36-pound bag with turkey and venison).
The higher prices are sure to get the attention of Federal Reserve Chairman Jerome Powell and his colleagues as they watch for signs that inflation is finally perking up. Fed officials have put interest-rate hikes on hold amid price gains that have stayed below their 2 percent target for much of the past seven years.
For now, it’s too early tell to what extent the price increases are really hitting consumers or partially getting absorbed by retailers, which are in a battle with each other and Amazon.com Inc. to lure shoppers with deals.
All 10 consumer-staples manufacturers in the S&P 500 that have posted earnings this season have topped projections for profit, according to data compiled by Bloomberg. Yet the two consumer-staples retailers that have reported so far have been a mixed bag: Walgreens Boots Alliance Inc. had a tough quarter, with revenue from “front of the store” products like makeup and shampoo on the decline, while Costco Wholesale Corp. did pretty well. Walmart Inc. and Target Corp. will shed light on the situation when they report a few weeks from now.
Another reason behind the price increases is that truckers are demanding higher pay in the U.S., and businesses are passing on the cost to customers.
In some areas, price increases weren’t enough to make up for the higher costs they’re dealing with. P&G’s baby, feminine and family care business increased prices 3 percent last quarter, and volumes were little changed. But the hit from foreign exchange, with a strong dollar hurting sales overseas, was enough to bring net sales down 2 percent in the unit.
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