Hot  

Big Brands Keep Raising Prices, With Limited Shopper Resistance

From soda to soap, consumer giants like PepsiCo and Unilever continue to raise the prices of their products significantly, passing on the higher costs they face, and consumers continue to spend, cutting back only modestly in recent months.

Prices will continue to rise, or at least remain at high levels, executives said.

On Thursday, PepsiCo reported that it raised prices 16 percent in the fourth quarter from the same period a year earlier, while sales volumes, which measure the number of Mountain Dew cans and bags of Doritos that were sold, fell 2 percent.

Also on Thursday, Unilever said that it had raised prices for its products, which include Ben & Jerry’s ice cream and Dove soap, more than 13 percent in the fourth quarter, the eighth consecutive acceleration in prices. It also reported that its sales volumes shrank, but by a lot less than prices had risen. Revenue growth at both companies beat analyst expectations.

Executives at Unilever suggested that they could have raised prices even higher, but held back. “We were very mindful of the pressure on consumers and chose not to fully offset the extraordinary level of cost inflation through pricing,” Graeme Pitkethly, Unilever’s chief financial officer, told analysts on a call. The company would continue to raise prices in the first half of this year, he said, and expected volumes to continue to fall, as inflation remained a “key theme” in 2023.

Pressure on profit margins, reflected in more modest forecasts for many companies’ earnings this year, suggested that consumers would continue pulling back. That is already hitting some companies harder than others: Last month, Procter & Gamble reported its first drop in sales in years, as price increases — it raised prices 10 percent in the fourth quarter — were offset by steeper volume declines than at its competitors.

While inflation has cooled, it continues to run higher than policymakers at the Federal Reserve would like. The Consumer Price Index rose at an annual pace of 6.5 percent in December, the slowest rate since late 2021. The Fed is expected to continue raising interest rates, squeezing consumers by crimping economic growth and making borrowing more expensive.

But the labor market remains surprisingly strong, which bolsters consumer spending and allows shoppers to absorb higher prices. Companies tend to be reluctant to cut prices once they have raised them.

Consumers are “holding up better than what we would have probably expected — or maybe what I would have expected — a year ago or six months ago,” Chris Kempczinski, the chief executive of McDonald’s, told investors last week. Despite raising prices, the fast-food giant has recently generated higher profits and recorded more visits to its restaurants.

Chipotle Mexican Grill has also been able to raise prices without significant resistance, reporting on Tuesday a big jump in profit for the fourth quarter. “We continue to see the higher-income consumer, the individual that earns over $100,000, coming more often,” Brian Niccol, Chipotle’s chief executive, said on a call with investors.

Sumber: www.nytimes.com