Prepare to Pay More for Diapers, Clorox and Cat Litter -- Update
By Aisha Al-Muslim
Makers of household staples from diapers to toilet paper are set to raise prices again this year after already hiking prices in 2018, hoping to offset higher commodity costs and boost profits.
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.
American workers are beginning to enjoy pay raises, with the tight labor market recently delivering the biggest annual wage increases since the recession ended. Average hourly earnings for private-sector workers rose 2.9% in January from a year earlier -- the largest such jump since June 2009. The U.S. also has continued to add jobs as a multiyear economic expansion continues.
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 firstname.lastname@example.org
(END) Dow Jones Newswires
February 10, 2019 11:20 ET (16:20 GMT)Copyright (c) 2019 Dow Jones & Company, Inc.