Food and household brands warn of more price hikes as Iran war costs bite
PG•Consumer goods and food companies expect higher energy, raw material and freight costs to prompt further price increases next year, despite shoppers’ reluctance to spend. Procter & Gamble raised its expected cost hit from those pressures to $1.4 billion from $1 billion.
1. Companies weigh price increases
Consumer goods and food companies including Coca-Cola, Procter & Gamble, Nestle and Reckitt have warned of further price hikes next year to cover rising costs. Higher energy, raw material and freight costs linked to the US war on Iran are putting pressure on companies as shoppers remain reluctant to splurge on groceries.
2. Passing costs to shoppers
Reckitt CEO Kris Licht said companies must decide how much of higher costs to pass on through prices and how much to offset with promotions. “We will probably have to price more at this level of commodity costs and input costs,” he said after Reckitt trimmed its annual revenue forecast. Procter & Gamble CFO Andre Schulten said the industry is generally raising prices because it has no way to recover the current level of commodity pressure without doing so.
3. Consumers may resist more
Procter & Gamble raised its expected hit to profit from rising raw material, energy and freight costs to $1.4 billion from $1 billion. Nestle CFO Anna Manz said volumes can dip in the short term when the company raises prices, adding that it would take pricing “to the extent we can without damaging medium-term consumer penetration.” PepsiCo has alternated between price increases and cuts this year as it tries to boost sluggish sales, and reported a margin hit last quarter.
