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LONDON: The world\u2019s top consumer goods and food companies, from Coca-Cola and Procter & Gamble to Nestle and Reckitt, \u200bhave warned of further price hikes next year to cover rising costs even as shoppers remain reluctant to splurge on groceries.<\/p>\n
Higher energy, raw material and freight costs as a result of the US war on Iran mean that the companies making everything from laundry detergent to soda and snacks face a balancing act to protect profit margins.<\/p>\n
Even higher prices on everyday items will fuel concerns that inflation will persist into next year. High gas and grocery bills are a big factor in next week\u2019s US midterm elections.<\/p>\n
Soaring costs related to the war are the latest headache for consumer goods, food and drink companies, which have struggled with lacklustre \u200csales since the \u200cpandemic, as shoppers have baulked at increasingly expensive name-brand packaged food.<\/p>\n
Last \u200byear, \u200cthey \u2060had to \u200bcontend \u2060with tariffs on imported goods imposed by US President Donald Trump.<\/p>\n
\u201cPricing is the last lever these companies have left, and they\u2019re pulling it into a consumer who\u2019s already tapped out on paying more,\u201d said David Wagner, head of equity and portfolio manager at PepsiCo. investor Aptus Capital Advisers.<\/p>\n
On Tuesday, Coca-Cola CEO Henrique Braun said pressure on consumers could extend into 2027.<\/p>\n
\u201cWe are seeing elevated cost pressures … driven by increased logistics and transportation costs,\u201d he said as the company raised its annual profit forecast.<\/p>\n
HOW HIGH CAN PRICES GO?<\/strong><\/p>\n The challenge is working out how high prices \u2060can rise before shoppers walk away. The chair of Lindt & Spr\u00fcngli said the Swiss \u200cchocolate maker is struggling because it misjudged how consumers would respond \u200cto price increases. He spoke days after the company ousted its CEO \u200bover concerns about its performance.<\/p>\n Companies are running out \u200cof ways to absorb costs.<\/p>\n Consumers in Europe and North America are particularly squeezed, said Reckitt CEO \u200cKris Licht.<\/p>\n He said companies must decide how much of the cost increase to pass on through pricing and how much to offset with more promotional spending.<\/p>\n \u201cWe will probably have to price more at this level of commodity costs and input costs,\u201d Licht said after the Durex maker trimmed its annual revenue forecast, sending its shares down around 5 percent on Tuesday.<\/p>\n Procter & Gamble \u200cCFO Andre Schulten expressed a similar view after the Tide detergent maker last week hiked its expected hit to profit from rising raw material, energy \u2060and freight costs to $1.4 billion \u2060from $1 billion.<\/p>\n \u201cAt this level of commodity pressure … the industry generally is pricing up because there is no way to recover this level of commodity pressure without pricing,\u201d Schulten said.<\/p>\n Procter & Gamble\u2019s pricing and sales held steady in the last quarter, but higher costs really hurt margins, said Brian Mulberry, chief market strategist at Zacks Investment Management.<\/p>\n \u201cConsumers are still spending if they see the value … but we likely are near the upper limit of what consumers are willing to pay for snacks,\u201d Mulberry said.<\/p>\n PepsiCo. has swung between price rises and cuts this year in an effort to boost sluggish sales and it suffered a margin hit last quarter.<\/p>\n Raising prices risks losing customers. Nestle CFO Anna Manz said last week that volumes can dip in the short term when the company raises prices, as consumers adjust.<\/p>\n \u201cLooking forward, there\u2019s now again some upward pressure on input costs,\u201d Manz \u200bsaid as Nestle posted faster quarterly volume growth than \u200bpricing growth for the first time since 2024.<\/p>\n \u201cWe\u2019ll take pricing to the extent we can without damaging medium-term consumer penetration,\u201d she said.<\/p>\n<\/div>\n