By Aisha Al-Muslim
Makers of household staples started raising prices last year on
diapers, toilet paper and trash bags to offset higher commodity
costs and boost profits. Some of those increases have yet to show
up on store shelves, but executives are promising to raise even
more prices this year.
Church & Dwight Co. recently increased prices for about a
third of its products, including Arm & Hammer cat litter and
baking soda, and some OxiClean cleaning products.
"The good news is that competitors are raising price in those
categories as we speak," Church & Dwight Chief Executive
Matthew Farrell said on a conference call last week when the
company reported higher quarterly sales and lower profits.
The company is now discussing more price increases with
retailers, including for personal-care products, Mr. Farrell told
analysts Tuesday.
Church & Dwight is one of several consumer-goods companies
that have raised prices -- or pledged to do so -- in response to
higher costs of raw materials and transportation as well as
unfavorable foreign-currency swings.
As a result, consumers are being asked to pay more for Pampers
and Huggies diapers, Bounty and Viva paper towels, Charmin and
Scott toilet papers and Arm & Hammer baking soda, among other
products.
The price increases are largely playing out in the companies'
favor, particularly for those whose competitors responded with
their own hikes, Wells Fargo Securities analyst Bonnie Herzog
said.
Sales volumes of household and personal products in the U.S.
declined 1.4% in January, according to Sanford C. Bernstein's
analysis of data from Nielsen. Dollar sales of those products rose
0.7% in the period, Bernstein said, indicating that the price
increases, on balance, are padding the bottom lines at
consumer-goods companies.
But even in a strong U.S. economy, there are limits to how much
brands can charge without losing some customers.
Tyler Aftab, a 35-year-old teacher in Green Brook, N.J., said he
noticed at his local Costco last week that Charmin and Bounty,
which were normally under $18 last year, were both being sold for
about $23. Glad trash bags, normally under $15, were listed at
about $19.
Mr. Aftab bought the Glad kitchen bags discounted for under $16.
He opted to buy Costco's Kirkland Signature brand of paper towels
instead of Bounty. He decided to not buy any toilet paper.
"I am a fairly loyal consumer of Charmin, but I will not pay $23
for the pack," Mr. Aftab said. "I will wait until those prices come
down."
Clorox Co. last year raised prices on about half of its
portfolio, including its Glad trash bags and plastic wraps, which
the company said helped it boost profit margins in the latest
quarter. Yet Glad's competitors didn't follow with their own price
increases as executives had expected, contributing to a sales
decline in the period. To defend the brand's market share, the
company would boost spending on promotions in the near term,
executives said Monday.
Clorox said sales rose in other categories like cat litter and
its namesake bleach, where it also raised prices recently.
CEO Benno Dorer last week voiced confidence in Clorox's pricing
strategy over the long term, and the company expects to invest in
new products. Higher prices for Kingsford charcoal and Burt's Bees
products went into effect in December and February,
respectively.
Starting in September, Procter & Gamble Co. began increasing
prices on a rolling basis from around 4% to as much as 10% on
various products, such as Pampers, Bounty, Charmin and Puffs
brands. The increases will be mostly in place by this month.
The company in January reported that the higher prices led to an
increase in organic sales, a closely watched metric that strips out
currency moves, acquisitions and divestitures. The company raised
its organic sales target for the year, while P&G's finance
chief, Jon Moeller, told analysts that higher pricing may affect
sales volume.
Kimberly-Clark Corp. executives said last month that they expect
volumes to suffer, particularly with tissue products, after the
company implemented price increases averaging in the mid-to-high
single digits on a percentage basis. Still, the company, which
makes Cottonelle and Scott bathroom tissues and Kleenex facial
tissues, predicted organic sales should increase 2% for 2019.
Companies that don't have a mix of high- and low-priced products
find it harder to pull off price increases, said Bernstein analyst
Ali Dibadj, because they risk losing price-sensitive customers for
good. "The big fear is your pricing is too high and that consumers
are just not going to come back to your brand," he said.
Write to Aisha Al-Muslim at aisha.al-muslim@wsj.com
(END) Dow Jones Newswires
February 10, 2019 08:44 ET (13:44 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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