By hxdyl @ Shutterstock.com
Low wage and economic growth has been holding back the ability of branded consumer products companies to raise prices for a long time. But economic gains in the last couple years have given big consumer companies the confidence to once again increase prices for their products. With wages growth and consumer confidence up, it is becoming easier for consumer companies to increase the prices paid for their premium products. Aisha Al-Muslim reports for The Wall Street Journal:
Makers of household staples from diapers to toilet paper are set to raise prices again this year after already hiking prices in 2018, hoping to offset higher commodity costs and boost profits.
Church & Dwight Co. CHD +0.56% recently increased prices for about one-third of its products, including Arm & Hammer cat litter and baking soda, and some OxiClean cleaning products.
“The good news is that competitors are raising [prices] in those categories as we speak,” Church & Dwight Chief Executive Matthew Farrell said on a conference call last week when the company reported higher quarterly sales and lower profits.
The company is now discussing more price increases with retailers, including for personal-care products, Mr. Farrell told analysts Tuesday.
Church & Dwight is one of several consumer-goods companies, including Procter & GambleCo. , Colgate-Palmolive Co. and Clorox Co. , that have raised prices—or pledged to do so—in response to higher costs of raw materials and transportation, as well as unfavorable foreign-currency swings.
As a result, consumers are being asked to pay more for Pampers and Huggies diapers, Bounty and Viva paper towels, Charmin and Scott toilet papers and Arm & Hammer baking soda, among other products.
For much of the past decade, price cuts have been far more common than price increases as U.S. companies were mostly reluctant to test consumers’ spending power and brand loyalty in a fragile economic recovery.
When companies tried to raise prices, “they better have had a uniquely strong innovation or be willing to lose market share to competitors,” said Sanford C. Bernstein analyst Ali Dibadj.
Adding to the challenge of raising prices is that more shoppers have been switching to store-branded paper towels and discount detergents, or opting for online upstarts such as Dollar Shave Club. Traditional brands have also been under pressure from retailers like Walmart Inc. and Amazon.com Inc. to keep prices low, pushing the manufacturers to focus on lowering costs in their supply chains or paring back advertising.
Read more here.
Jeremy Jones, CFA
Latest posts by Jeremy Jones, CFA (see all)
- Hard Criticism for Amazon’s Advertising - July 17, 2019
- The Disaster Waiting to Happen in Bond ETFs - July 16, 2019
- Global Supply Chain Shifting Away from China - July 15, 2019