Kleenex and Huggies will be more expensive as parent company raises prices on most products
- Kimberly-Clark, the owner of Kleenex and Huggies, is the latest consumer giant to raise price of its product as commodity costs eat into profits
- The company said in June it expects full year commodity cost inflation will be between $675 million and $775 million, $250 million more than it assumed in April and $375 million more than its original plan in January.
- It joins peers like Colgate and P&G that have flagged concerns about raising commodity costs in recent weeks.
Kleenex tissues, Cottonelle toilet paper and Huggies diapers will be more expensive as parent company Kimberly-Clark raises prices on most of its products to combat higher pulp costs.
The Dallas, Texas-based company announced Wednesday it plans to raise prices on most paper products by the "mid-to-high single digits" later this year to offset "significant commodity cost inflation." The price hikes will also affect Scott bathroom tissue, Viva paper towels and Pull-Ups training pants, the company said in a press release.
Kimberly-Clark, along with its peers Colgate-Palmolive and Procter & Gamble, have cited rising commodity costs, including paper pulp used in tissues and toilet paper, or raw materials as a drag on earnings in recent weeks. P&G said last month it is raising the prices of its Pampers, Charmin and Puffs brands by an average of about 4 percent.
Kimberly-Clark said its customers will start seeing more expensive toilet paper and paper towels in the fourth quarter.
The price of hardwood pulp has surged by about 60 percent since late 2016, Reuters recently wrote, citing the Pulp and Paper Products Council, which tracks prices based on global customs data.
Meantime, ongoing trade tension with Canada, along with escalating trade war with China, is intensifying concerns.
"When you have a commodity impact as large and significant as it is right now, I think our customers understand that. And we do have to recover and improve our net revenue realization. And so we are going to take the appropriate actions," Kimberly Clark's Chief Operating Officer told analysts in a recent earnings call.
The company said in June it expects full year commodity cost inflation will be between $675 million and $775 million, $250 million more than it assumed in April and $375 million more than its original plan in January.
The price hikes come at an inopportune time for Kimberly Clark and and its peers, which are grappling with hard-lined retailers promoting their own in-house brands, as well as a younger generations who are less loyal to big brand names.
In the June call with analysts, Kimberly Clark CEO Thomas Falk, set out to mollify analysts' concerns that potential price hikes either would not stick or would cause it to cede market share.
"We feel confident that with the commodity cost hit at this level that the cost structure for most of our competitors is similar and that there will be more broad scale price [hikes]."
Shares of Kimberly Clark opened down less than a half a percentage point. Year to date its shares are down 8 percent.