By Nathalie Voit
Branded consumer goods corporation Procter & Gamble announced its plans to raise prices on some of its most popular products on a Q2 2022 earnings call on Jan. 19.
On the call, P&G’s Chief Financial Officer Andre Schulten said that the company already told retailers in mid-December about the planned price increases on popular fabric care goods like Tide detergent and Downy dryer sheets. Schulten said P&G would institute the new prices by Feb. 28.
Schulten said the company would also raise prices on some of its U.S.-based personal healthcare brands effective mid-April.
The company already hiked prices across 10 of its product categories: Baby Care, Feminine Care, Adult Incontinence, Family Care, Home Care, Hair Care, Grooming, Oral Care, and Skincare.
The price spikes arise as ongoing global supply-chain problems limit companies’ ability to keep costs low and meet operational deadlines. Schulten spotlighted scarce transportation and labor markets, reduced material availability, and inflationary pressures as significant challenges the company faced during the conference call.
In particular, he said the company was being hit with higher commodity and freight costs. The increase in prices across the consumer giant’s portfolio is meant to offset those rising costs and safeguard profit margins.
“The degree and timing of these moves are very specific to the category, brand, and sometimes the product from within a brand. This is not a one size fits all approach. We’re also taking pricing in many markets outside the U.S. to offset commodity freight and foreign exchange impacts,” the CFO said.
The price increases come amid record levels of inflation in the U.S. In December, the Producer Price Index surged 9.7% year-over-year, its largest increase to date, the Department of Labor said Jan. 13. Meanwhile, the Consumer Price Index climbed 7% for the month, its highest jump since 1982, according to the department’s Bureau of Labor Statistics.
P&G changed its outlook for fiscal 2022 to an estimated $2.3 billion after-tax commodity cost and $300 million after-tax freight cost, up from the previous quarter’s outlook of $2.1 billion on commodities and $200 million on freight.
The brand seems confident consumers will keep buying its products despite the broad-based price increases.
“Consumers continue to prefer P&G brands and superior performance they provide even as inflation is impacting household budgets,” Schulten said in Wednesday’s call.
Additionally, CEO Jon Moeller pointed out that competitors were also dealing with commodity cost pressure; therefore, the company would not be the only one lifting prices.
“Pricing has been a positive contributor to our top line for 17 out of the last 18 years, 42 out of the last 45 quarters. When you have a business model that’s founded on innovation that provides higher levels of delight, solves problems better upon the consumers, you are able to charge a little bit more,” Moeller told CNBC on Wednesday.