Companies Raise Prices But Consumers Aren’t Fazed

Profits increase for CPG firms despite labor and supply chain costs amid strong consumer demand.

October 29, 2021

Rising Prices

ALEXANDRIA, Va.—Companies are raising their prices, and customers seemingly are willing to pay the higher costs, reports Axios. In turn, companies are more profitable, and shoppers should expect higher costs well into 2022.

The number of events where companies have mentioned "price increases" in the third quarter more than doubled from last year, according to Nick Mazing, director of research at Sentieo, a financial research platform.

Kraft Heinz raised its full-year core profit forecast, benefiting from increased pricing and sustained demand, reports CNBC. Campbell Soup, Conagra Brands and Unilever also have raised their prices to offset inflation caused by material and labor shortages.

The Coca-Cola Company and McDonald’s also reported higher-than-expected quarterly earnings, as consumers continued to purchase products and services from the companies despite higher prices, reports the New York Times.

In contrast, Amazon reported a shrink in profit and sales in the third quarter, as the retailer incurred nearly $1 billion of extra costs due to wage increases and incentives. Amazon says that its average starting wage is now more than $18 with an additional $3 per hour depending on shifts in different locations and signing bonuses that can be up to $3,000, reports the Associated Press. It also incurred an additional $1 billion in lost productivity and operational disruption costs.

For Hershey, the strong consumer activity surrounding Halloween has led the company to raise its annual forecasts for sales and profit after posting better-than expected results, reports Reuters. The chocolate maker has also raised its prices to offset raw materials and shipping cost increases.

However, Hershey says the elevated consumer demand was expected to offset the higher costs. Consumer spending on Halloween-related items is anticipated to reach a record high of $10.14 billion this year, versus the $8.05 billion in 2020, according to a National Retail Federation survey.

Consumer spending is not slowing down any time soon, as consumer confidence in the economy increases and with U.S. consumer having an excess of $2.3 trillion in savings since the pandemic began, reports Axios.