Food and household brands warn of more price hikes as Iran war costs bite
XLP•Consumer goods and food companies expect to raise prices next year as higher energy, raw material and freight costs linked to the US war on Iran pressure margins. Procter & Gamble raised its expected cost hit to profit to $1.4 billion from $1 billion.
1. Costs drive pricing plans
Companies including Coca-Cola, Procter & Gamble, Nestle and Reckitt have warned of further price increases next year as energy, raw material and freight costs rise. They face pressure to protect margins while shoppers remain reluctant to spend more on groceries.
2. Consumers may push back
Reckitt CEO Kris Licht said companies would probably need to raise prices at current commodity and input cost levels, while balancing increases against promotional spending. Procter & Gamble CFO Andre Schulten said the industry was generally pricing up because it could not recover the level of commodity pressure without doing so.
3. Risks to sales and margins
Nestle CFO Anna Manz said volumes can dip in the short term after price increases, and that the company would raise prices only to the extent it could without damaging medium-term consumer penetration. PepsiCo has moved between price increases and cuts this year to support sluggish sales and reported a margin hit last quarter.
