Consumers around the world are becoming obsessed with higher prices for daily necessities, warning that companies from food giant Unilever to lubricant maker WD-40 are tackling supply difficulties.
Manufacturers of Dove Soap and Magnum Ice Cream Bars increased their average price in the previous quarter by more than 4%. This is the largest rise since 2012 and shows that price increases will continue next year. Similar refrains are from Nestle SA, Procter & Gamble Co., and Danone SA, which dominate supermarket aisles and kitchen cupboards.
“We are under inflationary pressure for at least another 12 months,” Unilever CEO Alan Jope said in an interview with Bloomberg Television. “We are in an inflationary environment once every 20 years.”
Not only are companies facing a dire combination of supply chain challenges, but they are also experiencing high costs for energy, raw materials, packaging and transportation. Most consumer goods makers reporting this week’s results have expressed confidence that long-term blows can be limited to profitability. This means that as Christmas approaches, the pain will reach the consumer and the pressure on the pocket will increase.
The recovery in pricing power represents a major shift in the global economy, poses new challenges for central banks after years of falling below inflation targeting. They are wondering whether to expedite the removal of stimuli from the pandemic-stricken economy or to put up with the temporary rise in prices.
“This is a consistent story around the world,” said Jennifer Lee, senior economist at BMO Capital Markets. “This is what consumers have to resign right now.”
Companies usually raise prices gradually. As a result, the start of an inflationary period is usually the most detrimental to profitability. If costs rise too quickly, shoppers will either shift to cheaper products from their competitors or postpone their purchases. Some are tied to contracts, delaying households from feeling a pinch.
“We can’t take over the increase from one day to another,” Nestlé CEO Mark Schneider told Bloomberg TV last week. “But now that action is underway.”
Nestlé’s overall price rose 2.1% in the third quarter, the fastest in at least five years.
Emerging market consumers are facing the greatest inflation ever, as seen in Nestlé’s results. A leading Swiss food company that manufactures Nespresso coffee and Digiorno pizza has raised prices in these countries by 2.6% in the first nine months of the year, three times that of developed countries. Schneider expects margins to fall this year given the time lag required to pass on higher costs. After that, improvement should be resumed in 2022.
“The front line of inflation is that things get worse, and of course we’re working on pricing to make up for most of it,” Schneider said.
Danon also states that European and US shoppers cannot escape the oppression. We expect a cost increase of about 9% in the second half of the year. “We could see even higher inflation next year,” Chief Financial Officer Jürgen Esser said in a conference call.
Downey Soft Finish and Puff Tissue Paper maker P & G estimates that higher goods and fares will cost $ 2.3 billion this year. The price of many products is rising and the situation continues to “evolve”.
The Federal Reserve Board said in a report on the US economy last week that many companies are “capable of communicating increased costs to their customers in the face of strong demand.”
Price pressure is not limited to daily necessities. According to Auto Trader Group Plc, used car buyers in the UK spend about a quarter more than a year ago as surge demand clashes with low availability. 17% of vehicles under a year are said to be more expensive than new equivalent vehicles.
Jay Rembolt, CFO of WD-40, a manufacturer of industrial lubricants and cleaners based in San Diego, said in a conference call that the company is experiencing a “significant increase” in shipping costs and supplier charges. Said. We are raising the price accordingly.
“We expect prices to continue to rise until mid-next year before some easing in the supply chain is seen,” said Lee of BMO. “Solving itself is a big challenge.”
Do you think everything is expensive now?Get ready for the next
Source link Do you think everything is expensive now?Get ready for the next