More than a full year into the COVID-19 pandemic, many food and consumer packaged goods (CPG) manufacturers are hinting at raising prices for commodities such as diapers, toilet paper, cereal, peanut butter, poultry and other meats.
Procter & Gamble, one of Walmart’s largest suppliers, recently said it would begin raising prices this fall on household items like diapers and toilet paper. It cites rising raw material costs and climbing transportation expenses because of higher fuel prices and tighter freight capacity.
Dallas-based Kimberly Clark said March 31 it would raise prices in its Northern American business unit. The CPG giant said the increases are necessary to help offset high commodity inflation costs.
“The percentage increases are in the mid to high single digits,” the company noted. “Nearly all of the increases will be effective in late June and impact the company’s baby and child care, adult care and Scott bathroom tissue businesses.”
Higher commodity costs for grains have already pushed food companies such as Hormel to raise prices on Jennie-O ground turkey, which took effect earlier this year. Nielsen recently reported bacon was 8.3% more expensive in March than in January 2020, well ahead of the pandemic. Ground beef is almost 5% more costly, and a loaf of bread costs on average 22 cents more than it did a year ago.
Stephens Inc.’s analysis shows rising energy costs, which impact retailers and suppliers, leading the inflationary pressures as wholesale crude oil prices are up 261% in late April, compared with a year ago. Wholesale gasoline prices are 57% higher in April than a year ago.
Corn, wheat and soybeans are also pushing prices upward. Corn prices are up 119% from April 2020, soybean prices are up 87% year-over-year, and wheat prices are up 17.6% in the past two months. When grain prices rise, meat and dairy prices follow suit. Chicken prices are up sharply year-over-year, with wings up 181% and boneless, skinless breast meat up 140% from April 2020.
Tyson Foods has said it plans to recoup some of the higher costs in the fall with price increases to its retail and wholesale customers.
Longtime Walmart supplier J.M. Smucker Co. said higher grain costs forced a recent price hike for Jif peanut butter, and its pet products line will see price hikes to offset rising shipping costs and other inflationary pressure.
Kofi Bruce, chief financial officer at General Mills, said in the company’s March 24 earnings call that the company will soon raise prices on cereals. General Mills said higher input costs resulted in a drag on gross margins 1.16% lower than analysts expected in the fiscal third quarter and 2% below the prior quarter.
The Coca-Cola Co. also plans to raise prices on some of its drinks to pass along some inflated commodity prices. CEO James Quincey told analysts that pressure is building, and price increases are likely in 2022.
Food analysts with Bernstein remain doubtful that General Mills and other food companies will fully offset the higher input costs of grain prices and higher transportation costs.
According to the April 13 report from the U.S. Bureau of Labor Statistics, inflation is rising. It indicated a 2.6% rise in the Consumer Price Index for the 12 months ending March 2021. The agency said it was the most significant over-the-year increase since August 2018. Food prices increased 3.5% over the past 12 months, and energy prices increased 13.2% in the period. Inflationary prices for non-food and energy rose 1.6% in the period.
Mark Lambert, an agri-economist with Arkansas Farm Bureau, said inflationary prices in grains and fuels show no signs of abatement. He said grain futures pricing is being buoyed by more export demand from China for soybeans. He said more corn is being used for ethanol blending as consumers begin traveling more.
“Every company that has products on retailer shelves is also paying more for shipping and transportation costs, and…