Rising cost of raw materials forces consumer prices up

Related tags Price increases Cost

Big US personal care players struggling with increasing raw material prices are announcing retail price increases to ease the pressure on shrinking margins.

Last week Procter & Gamble and Kimberly-Clark announced significant price increases for their consumers in the US, with both companies citing the rising cost of raw materials and energy prices.

This round of price increases is impacting tissue-based products at Kimberly-Clark and detergent products at Procter & Gamble, while oral care player Colgate-Palmolive said it was also considering price increases that could impact its prices across the board.

Kimberly-Clark says the increases to its tissue-based products will be in the region of 7 percent, while the price increases at Procter will be in the region of 4.5 percent.

Rising cost of packaging

In particular, Procter & Gamble cited rising materials prices which has increased the cost of its packaging, a factor that is likely to influence the personal care segment in coming months if cost pressures continue.

All the big players have been coming under pressure as their profit margins have been hit by the increasing costs, a problem that is being compounded in the US by the fact that the consumer retail market has remained sluggish since the onset of the economic crisis in 2008.

Things are not expected to improve significantly, evinced by the fact that the rising costs are filtering down to the consumer price index in North America, putting further pressure on many consumers who have already cut back on spending.

Consumer prices on the up

Recently announced data from the US Labor Department shows that in February consumer prices rose by 0.5 percent, the highest hike in nearly two years.

This biggest factor in the increases is food and fuel costs, but these are two vital elements of the American household budget and so the rising prices are likely to put pressure on purchases of discretionary goods.

In the personal care arena this is most likely to hit premium, luxury or non-essential products, a phenomenon that was already underlined by the big dip in sales of luxury skin care products and fragrances at the height of the economic crisis.

In recent weeks analysts have been expressing concerns that inflation is going to become more of a widespread problem in the US, especially on the back of political instability in the Middle East which has already affected oil prices.

Related topics Business & Financial

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