Higher commodity costs lead to price hikes from Kimberly-Clark and other consumer giants
- Kimberly-Clark is raising prices on many of its North American products, like Scott toilet paper and Huggies diapers.
- Higher commodity costs are hurting companies' profits, but they may lose out on sales from cash-strapped consumers who are still reeling from the impact of the coronavirus pandemic.
- J.M. Smucker raised prices for its peanut butter in August, while General Mills is planning to hike prices.
Kimberly-Clark said Wednesday that it would hike prices on staples like Scott toilet paper and Huggies diapers, joining the growing list of consumer products companies that are raising prices.
Higher commodity costs are putting pressure on companies' profits, but cash-strapped consumers who are still reeling from the impact of the coronavirus pandemic could opt for cheaper private-label products instead. In February, the unemployment rate was 6.2%, according to the Department of Labor. Consumer products companies are also starting to lap their surging sales sparked by last year's stockpiling, and many analysts are predicting lower sales as more consumers get vaccinated and return to pre-pandemic habits.
Prices on most of Kimberly-Clark's North American products will rise by the mid-to-high single digits, and consumers can expect to see most of the higher price stickers by late June. Impacted business segments include baby and child care, adult care and Scott toilet paper. If rival Procter & Gamble follows its lead, consumers could also see higher prices on Pampers diapers and Charmin toilet paper.
Shares of Kimberly-Clark rose more than 1% in morning trading. The stock has climbed 10% in the last year, giving it a market value of $47.6 billion.
J.M. Smucker was among the first to raise prices as commodity costs hit profit. The company hiked the price of its Jif peanut butter in August as peanut yields fell, and its competitors followed its lead.
"In this case, and particularly in peanut butter, it was very clear that we were experiencing cost pressure and could demonstrate that to our trading partners and so forth," CEO Mark Smucker told analysts in November.
General Mills CFO Kofi Bruce said on the company's March 24 earnings call that it is taking action now and in the coming months to raise prices. The company fell short of Wall Street's estimates for its fiscal third-quarter earnings, hurt by higher commodity costs. The coming price hikes would benefit its results for fiscal 2022, which starts in late spring.